Royce Yudkoff
speaker
143 appearances
1 recordings
1 series
first heard May 2025
last heard May 2025
Royce Yudkoff’s voice in public audio — every appearance, attributed to the second.
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Appearances
So we can't even implicitly acknowledge that we're interested in investing in a student, no matter how much we like them or how much we like their business plans or how sure we are for success. And we always tell them the same thing, which is we're not allowed to even have a conversation with you. But if you're interested, reach out in May. after graduation.
And what we find is that there's every year a few students who like us enough to wait till May to see if we're interested, but a lot of students get funded. If they're looking for search funding, they're doing it before that. And if they're unfunded, well, they don't need funding. And then when they come time to fund, they usually give us a call and
What we discover is often they don't need much equity capital and they're able to get it either from section mates or family friends or former employers. And there's an advantage of having smart money, but there's an advantage of having less smart money. These investment opportunities are not just dribbling off the trees.
Yeah, I would say I agree with every word you've just said. I run into unfunded searchers everywhere. I coach little kids ski racing up in Mad River Glen, really small mountain relative to corporate skiing these days. And the other day I was having lunch and realized that there are three people that I could throw French fries at
that were searching for businesses at some stage of concluding self-funded searches. And there's a little place in Vermont. What are all these people doing there? It's just everywhere. So it's become mainstream. And I think the reason it's become mainstream as a career path is you can build the life you want to live, earn a great living,
And you can have independence in a way that you just don't get from a boss. And there maybe was a time when working for a big corporation had this safety to it. But I think that's pretty much gone. I think people recognize that you can work for your big company for 25 years and they can eliminate your division or send it to South America, Asia or whatever. And you're going to be out of a job.
We like to distinguish between the risks you can see and the risks you can't. And when you're running your own business, you can see those risks. When you're working for a big company, you can't see those risks. They just happen to you.
That's a really interesting question. I think if you go back to the world before COVID, you've heard of COVID. The world before COVID, I think, proceeded somewhat orderly in an orderly fashion, as much as the world ever proceeds in an orderly fashion. And I think lots of baby boomers who own businesses got to the position where they said, wow, COVID's been really bad for my business.
COVID's been really great for my business. COVID's really disrupted my business. I need to wait and see what's going to happen. And for the businesses that did really poorly, some of them bounced back. For the businesses that did really well, some of them have bounced down. And so they're still juggling. They're still looking for steady state.
And so if you think about when you go to buy a business, you want to look at four years or five years of prior cash flows, that's going to include COVID still. So there's enough movement in results, just COVID-induced movement in results that I feel like there's been a lot of sellers who are just treading water. I'm going to wait till next year. I'm going to wait till next year.
I'm going to wait till next year. And then one of the sad things about waiting for next year is that things don't stop happening. You've got tariffs, you've got inflation, you've got all kinds of crazy things that happen in the marketplace that while small firms are probably less impacted than the big public firms, it does boil down.
And so I think there are lots of sellers who are waiting and waiting for times to settle down. And of course, I don't know. Do things ever settle down? I don't know. I don't know. So I think there are a bunch of sellers who are now reaching the end of their patience and health and are going to become more interested in selling as time goes on. So I think what you're going to see is...
Luckily, we'll never know if these predictions are true. I don't think the Patriots are going to win the Super Bowl next year. I do think the Celtics will win the NBA championship. And I do believe that there'll be some surge over the next three or four years of pent-up selling, and then it will go back to some steady state level.
So there are certainly people who buy software businesses. What we find, though, is they tend to buy niche software businesses. They're software for podiatrists. They're software for small municipalities. They're things which you're unlikely to get big disruption and unlikely to have these cataclysmic shifts in. So it's software where the underlying market is fairly steady.
What we don't find, at least if we find it, we throw it away really quickly, is people investing in very fatty software, the latest computer app or social media, whatever it is. So there's less of that, but there are, if you will, the business of established software, improving it, growing it, maybe migrating it to the web, but that the market is nichey.
That seems to be a pretty sustainable investment thesis.
And sometimes what they're doing is bringing management talent and skill to a segment that didn't have that management talent and skill. We just did a podcast with one of our former students, Logan Leslie, and he's doing a roll-up of auto repair facilities.
And what was fascinating is that it used to be what would happen is you can imagine, think about an eight to 10 bay automotive repair facility. The way this gets started is somebody starts repairing vehicles and the person is probably a pretty good mechanic. And pretty good at repairing things.
And now as he gets bigger, assuming it's a man, as the place gets bigger, suddenly you're now hiring and ordering and doing accounting and doing a whole bunch of back office stuff. And then as you get to a certain size, the founder is no longer pulling wrenches and changing water pumps. All they're doing is management activity. And you know what?
They might be fabulous mechanics, but it's unlikely they're both a fabulous mechanic and a great manager. And what Logan has done is said, let's let the fabulous mechanics be mechanics, And we're just going to take the management piece and do that centrally. And it has been a fabulous success and really clever.
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