Jon Staenberg
Appearances
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Amazing. Thank you so much.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And of course, Warren's always been about value investing. And that's something I hold close and dear to how I look at my own investments. So but from Omaha, I went out to the West Coast. I went to Stanford and went to Stanford Business School as well. And certainly was exposed to a lot of entrepreneurialism there, including, of course, the beginning of venture capital.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And I knew going to the business school and meeting the incredible people who were involved with VC at the time, that that's something I wanted to do. I, after business school, went to Microsoft to steep myself in tech and startups. And from there, I then launched a career of some 30 years in venture capital.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
About five years ago, almost six now, I guess, I started thinking to myself that venture capital was a different game and maybe not one for me. And yet, I wasn't even close to being done. I think Warren's 94 or so now, and I don't see myself slowing down. And like Warren, I still skip to work. every day because I love what I'm doing. And I remember thinking, what am I going to do after venture?
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
I still love being around entrepreneurs. I still love the passion that they have. I love coaching and mentoring. And I love the art of the deal. So I went back to Stanford and met my professor. from many decades ago, Irv Groesbeck. And Irv is the godfather, the OG, of something called search funds.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And we spoke, and I talked about how I can't believe I missed it the first time around, because it's been around for a while. But I didn't want to miss it this time around. and steep myself in search funds. And today I have created, as of last year, the world's first fund of funds for search. Search is also called ETA at the business schools, Entrepreneurship Through Acquisition.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Yeah, thank you so much. The pleasure is mine. It's really fun to be on this podcast. It's number one on Apple. You guys have done a tremendous job, so excited to be here today. Yeah, so I always like to start because of where I'm from. I'm from Omaha, Nebraska, and I grew up in a very, very middle-class family, a family of entrepreneurs.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
So I basically have created Agate Hound Fund, which invests in funds, which invests in the searchers. And we have become a proxy, if you will, or index fund for small American business run by really smart MBAs using the traditional search fund model. So that's a lot of words. And I'm going to stop there and apologize for going on for so long.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Yeah. So at a very high level, search funds are where MBAs from business schools, instead of taking a job straight out of business school, they go out and see if they can get 8 to 12 investors who will give them a small amount of money, enough money to pay themselves to live and to do research on companies for up to two years while they search to find, acquire, and then run a small business.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
So lots of people, it's actually becoming kind of a hot sector. There's a lot of people on social media talking about buying businesses and lots of people talking about doing a search. We are very, very specifically focused on what I call the traditional Stanford Harvard Search Fund model, which has a lot of elements that make it successful.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
I think the thing that is the headline grabber here is that the Stanford study, which comes out every two years, and I encourage your listeners to read two documents if they're interested in this, the Stanford Primer, which describes in detail
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
the search fund process, and then the Stanford study, which is updated every two years with the latest numbers on all search funds, all traditional search funds, and the results. And the headline grabber here is that over the last 40 years, if you had done and participated, invested in every search fund, those that succeeded, those that didn't, you would have gotten a net 35 plus percent return.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And that's kind of remarkable. And I sometimes say to people, I don't know any other asset class that has that kind of performance. And so it's pretty intriguing. In fact, yesterday I had someone say, that's impossible. And so I would encourage people to read the study and take the time to understand why this playbook works so well. But at the end of the day,
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
We're living in a remarkable time of baby boomers needing to transition into retirement. There are kids not necessarily wanting to take over the family business. And we also are looking at implementation of AI and tech tools that is changing how small businesses compete. So it's a really, really interesting time for this small asset class. So that's what it is.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Yeah, great question. Sure, of course. It's very broad, but within that breadth, there is a lot of discipline of the companies being bought. So what do I mean by that? So in general, what we're looking for are businesses that are about $2 to $5 million in EBITDA, have some reoccurring revenue, have been growing for at least three years, have hopefully 20 plus percent EBITDA margins,
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
My dad had a real estate business and my mom actually took it over when my dad passed away and she started several other companies. And I got to see firsthand what it was like to be entrepreneurial and to grow. have to do the day in and day out of running a small business. And that always stuck with me. My first job was picking weeds at eight years old at one of our apartments.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
are not facing too much customer concentration risk, generally not in regulated industries and so on. So I'm giving you kind of a profile of what after hundreds and hundreds and hundreds of acquisitions, we know works. And so one of the beauties of this is that, The searchers looking, and by the way, searching is a really hard thing to do. Most people don't fully understand it.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And searchers who come out and decide to take this entrepreneurial path often don't even acquire And so they went to a major business school. They came out. They raised this money. Instead of taking a job, they tried to find a small company that I've described. And over a third of the time, they can't get it done. for a number of reasons. So it's really hard.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And part of that is why it works so well is because there's a lot of discipline on the companies that they're buying and making sure they're appropriate companies. But to be very specific in answering your question, It's everything from mostly non-sexy mom and pop businesses like pool cleaning, med spas, dental clinics, street cleaners, meter readers, airplane parts, et cetera, et cetera.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
In our fund that we closed in June, we're going to have something like 200 of these acquisitions in over 125 different industries across the United States. And one of the great things is if this Harvard or Stanford or Booth or MIT or Wharton MBA goes in and buys an HVAC company in Topeka, well, here they're coming with their energy and smarts and training.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
and their energy of being 35 and wanting to climb the mountain to take this company that's doing well already, profitable, and take it to the next level and grow it to the point where they can sell it to private equity at quite a different, much higher multiple of EBITDA. And that's part of the reason this works so well.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Well, a couple of things. Thanks. I am really excited about helping grow this ecosystem and being part of it. It's an amazing group of people. Part of the reason I love it so much is that the people who do this particular type of small business acquisition have been doing it together for a long time. People know each other. There's a familial kind of feeling to it. There's an academic feeling.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
People are constantly trying to figure out even better practices. And so getting more ensconced in this world is such a pleasure. And of course, trying to add value myself, coming from my tech background of 30 years in venture,
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
and having seen a few things and trying to bring a little bit of a different perspective, but still honoring and being committed to working with this incredible group of people in Playbook. In short, I'm looking forward to making our first fund be very, very successful. And then we're probably this year going to raise a second fund.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And so excited to continue to expand on what I think is the most exciting opportunity in my lifetime.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Well, nobody had ever done this, and I get it. You probably speak to people who have funds worth billions of dollars and changing the world and building companies that are Fortune 500 and beyond, et cetera. For me, The exciting part is being in this niche and creating a way for others to have access to this incredible asset class, this return profile, and the entrepreneurs.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And so I really understood the value of hard work and treating people right and understanding customers. And that's basically the foundation that really has led me to today. I was lucky also enough to be around Warren Buffett. My mom was friends with his wife. And so he has always been a tremendous influence on my life and the way I look at the world.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
I mean, the people I've met are just incredible. Just last week, I was talking to someone who grew up in a very small town in Mexico. None of her family had ever gone to college. She decided she was going to go to college. She was a chemical engineer in the US and decided to go to business school, learn about search, went out and said, I'm going to go do search. She's incredible.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And she found a company that is such a need, but so profitable and she's going to grow it. And her excitement and being involved with her is exactly why I do this. So for me, that those stories are the reason I do this. And I'm looking forward to continuing to meet these great people who are doing this.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Well, the world's changing quickly. I, as you said, have been around for a little while doing this and I hesitate to say this, because we're warned never to say it, but it feels like this time is different. And so going forward, I think it's going to be really important. I have a teenage daughter.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
The world she's going to face in five and 10 years is going to look very different than the world as it looks today, I suspect. And for business leaders, keeping up with and adjusting and pivoting to these new realities is gonna be ever so important. But having said that, some of the basic foundational truths of what makes things work are not gonna go away, but the tool set
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
available is going to be so much broader and so interesting and come with some unpredictability. So being able to adjust to that and embrace it, I think is going to be one of the most important things going forward.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
Well, it's fun. I just... You can tell that I'm pretty passionate about small business and entrepreneurship and this particular approach to acquiring companies and this investment vehicle. And I would just encourage if anybody... is interested in learning more. Thankfully, Stanford's done such a good job. But there are search fund conferences you can go to. You can go to agathound.fund.
Becker Private Equity & Business Podcast
Investing in the Future of Small Business: Jon Staenberg on Search Funds & Entrepreneurship 2-18-25
And we've got some resources there. And I'm available. I'm happy to talk to people about this. Because it really is, for me, I'm selling my vineyard in Argentina. I'm not doing venture. This is all I'm doing. And I feel so lucky to be involved with it. So yeah, come talk to me about it. I'd love to talk to you.