My fifth guest of the show is Nick Haschka, an MIT graduate living in San Francisco focused on buying small private companies through his firm Cub Investments, along with two other partners. Together, they recently purchased a business called The Wright Gardner which provides interior plant leasing and maintenance services to companies in the bay area. One thing that is interesting about Cub's approach is their use of add-on acquisitions to expand the plant leasing business and part of our discussion is on how they view the risk with add-ons versus platform acquisitions, which was very interesting.
The more I read and learn about the micro PE and permanent capital space, the larger and more diverse it feels. Every investor invests differently and each story is different. Nick is no exception, and in our discussion we cover how his background has influenced his investing, his unique work experience, misconceptions he sees in small company investing, and his disagreements with the concepts of competitive advantage and Porter's Five Forces.
I hope you enjoy our conversation as much as I did.
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1:30 Brief overview of Nick's background
4:00 Strategy of focusing on local businesses, found The Wright Gardner
5:04 No external investment, utilizing SBA loan program
5:30 What experiences prepared you best?
6:44 How do you view add-on acquisitions at Cub and diversification?
9:31 Weighing buying a new platform business versus an add-on
11:32 Risk of investing in an add-on and integrating it into your existing companies
14:42 What is involved in the Cub Investment "car wash?"
16:46 Examples of new processes added to companies
18:18 Are there benefits to not having experience in the business you're going to acquire?
19:31 Misconceptions with buying small companies
23:34 What gets looped into the earnings number that you need to remove and how do you view that process?
25:22 Role of the 80/20 rule in due diligence and working with the seller
27:53 Role of the previous owner after acquisition
30:29 Is the size of purchase an indicator of the replacement value of relationships with customers?
32:28 Growth of Cub Investments
34:26 Change of valuations recently
36:39 Competition for deals
37:34 What class in college would you teach?
39:10 Most fortunate event that was completely random?
40:47 Best business you've seen?