The First Steps to a Family Holdco

So you recruited him, you recruited Leo away from other would be employers of him.

He was very convinced with the paper, I guess.

To the extent that there was a financial analysis in the white paper, ling this path of a self funded search versus what a career in private equity or a career as an executive in startups, or was there an analysis there that was, that was quantified analysis.

Yeah, I, I did my analysis obviously based on the salary, the, the shares that I, that I would get from setup as well as the carry that I would get it in pe.

And then I would look at kind of the acquiring like between 1 to 2 million hounds business and kind of with, with kind of the sort of standard EBITDA margin, you know, based on the search model and build that out for kind of over the five to seven years and, and you know, assume that I would own majority of the business and, and see how the economics kind of played out.

I would say for startup it's, you kind of assume, you know, that the salary is certain but the, the, the, the equity is cherry on top because you know, 90% of startups fail, your equity might be worth nothing. So you have to heavily discount the equity component for private equity in, in Europe, kind of similar story, you really have to be there long term to, for your carry to materialize.

And so if you, if you happen to leave halfway or become a bad lever, then your carry might not materialize. And that was kind of one of the decisions that Leo made is that you know, if, if he wants to do PE for a number of years and then come join me at Acacia once I build out one or two businesses, would that be possible? And the answer is, you know, he might lose out all his carry because he…

So that was a decision. It's more kind of long term the economics, how that works out and apply a certain probability to each scenario. For the startup scenario, I guess lower probability for then private equity and then for the search fund, high probability because I think of the 75% searchers who manage to acquire businesses, roughly 90% managed to generate some sort of returns to investors.

And then the Stanford search fund did break down, kind of what the returns profile look like. And those who kind of generate 3.4x returns to investors are quite high. So the odds for the outcome of the search fund model is quite high. And that's what I apply to my model.

And so even from an economic perspective, leaving aside all of the stuff that we talked about earlier, the qualitative features, the freedom, the captain of your own ship, the Autonomy strictly dollars and cents analysis also showed search as winning, search as winning.

But you have to also take into account that is a binary process. Either you make it or you don't. That's why it was important for me to spend three months talking to 70, 80 different searchers, hearing their stories, understand whether I can do that.