How do search funds deliver 35% net annual returns?

Episode 90 - Jon Staenberg Transcript Jason Kirby (00:41.934) Welcome back to Fundraising Demystified. Today we have John Stainberg with us, founding partner of Agate Hound Fund, also short for Always Having Fun, as I just learned. Welcome to the show, John. Jon (00:45.477) Steinberg. Steinberg. Jon (01:11.909) Great to be here, Jason. Jason Kirby (01:13.784) So John, you join us from back in the day coming from Stanford Business School, going early days into Microsoft and just accelerating your career, then going into venture. And now, in the last couple of years here, transitioning more towards search funds. So you have a very interesting story background. And I think one thing that I want to start with for our audience is you were in the early days of Microsoft that you gave you access to probably all kinds of different things. Like, you know, I always talk about PayPal mafia and like the Airbnb mafia, you know, essentially kind of the Microsoft, you know, mafia, uh, just kind of give us a little insight into those early days of, of Microsoft and how that led you to going into venture. Jon (01:59.033) Well, it's interesting. Coming out of Stanford Business School, where I had a lot of exposure to Silicon Valley and entrepreneurship in general, I kind of knew that I always wanted to do venture. But someone gave me great advice. They said, don't go into venture until you've actually got a skill, have worked at a company for a while, have been beat up a little bit. have had to live with your decisions, have had to hire, fire, et cetera, et He said, do that for five years and then go into venture and you'll be a better venture capitalist. And I thought that was terrific advice. And five years almost to the day, always knowing that my eyes were on that prize, I left Microsoft. But Microsoft was, I would use the word thrilling, adventure for me. It was way, way beyond, wildly beyond my expectations in terms of engagement and inspiration and exciting. And today, 50 years after Microsoft was founded, Microsoft is as relevant as ever and continues to be an unbelievably influential in, in, outperforming big company. And it's kind of amazing to think about those early days. It's funny to think also how they hired back then, which people don't seem to do as much of, although with AI, maybe we will go back to this. That's my prediction. They hired not by skill set. They hired by saying, hey, How competitive and tenacious is this person? How much can this person, what's their thinking, critical thinking skills? How do they attack problems? Because if you get that combination, you'll figure stuff out. And as we go into the world today looking forward, figuring stuff out is maybe our greatest asset. Yeah, they wanna look at Jon (04:21.902) you know, where have you succeeded, where have you failed, where have you been on teams, et cetera, et cetera. But coming in to say, I'm a sales leader, I don't think that's going to be as important going forward. Okay. And so one thing I would say to founders is constantly work on your ability to be curious, to figure things out, to try and understand the world where it's going. And that's what Microsoft is about. So I didn't really know much about computers. I didn't really know much about marketing, but we figured it out. The other piece was, and this is instilled from day one when I was a kid, but I do think about entrepreneurship and founders and drive. just, you know, I know that the retire early movement for the young kids is a thing, but at the end of the day, I am sure if you look at any successful great leader, founder, they didn't work 40 hours a week. And I have lots of friends who are at these big companies who, you know, they've kind of checked in, checked out, mean, and said, I'll get my free meals. I won't work weekends. You know, I'll come in a couple of days a week and I don't think that's what it's about to be a founder or an entrepreneur or to make a startup or a young company work. And we'll see what happens going forward. But my another prediction here is companies, and I'm sorry, I'm going down a path here because I'm thinking about AI so much, is that companies are going to start assessing employees differently. Cultures are going to start changing. And people are going to be called upon to do the work of two, three, four people as the tool sets become bigger. And that's going to take not less time, more time, because there'll be less people. what I'm talking about is I went from Silicon Valley to Microsoft to venture capital. And venture capital, we're talking three decades ago, was very much that kind of place. Jon (06:49.794) where people also thought, let's work our butts off, let's change the world, let's figure out things that haven't been figured out before, and let's create a bunch of value. And that, to me, was a very natural extension from going from Microsoft to that. And for 30 years, I did it, and I felt like I had the best job in the whole world. Jason Kirby (07:17.038) Well, let's talk about some of the bets that you made in the early days. So, you know, it was the late nineties, obviously the rip up into the dot com boom and bust like, some of the big bets that you made that you're most proud of during that period and over your career adventure. Jon (07:33.25) Well, mean, you know, I've done a number of vets and I've gotten, and quite frankly, sorry fighting a little cold, but quite frankly, I'm not sure. You know, if you ask a venture capitalist, what's their favorite deal? Jason Kirby (07:39.054) 300 plus, I believe, is the number. Jon (07:56.643) It'll be the last deal they did. They're excited. They're optimistic. It's shiny. It's bright. It's new. It also means that it's hard to know when you go into a deal for sure that it's going to work. So I mean, I'm happy with the notable outcomes, but there's plenty of companies that I invested in early that I didn't get a return. hopefully learn from the companies that I had an opportunity to invest in and I didn't invest in. I was actually talking to someone on the plane this week who had a chance to invest in Amazon at a five million pre and didn't do it. And I said, hey, Tom, don't worry. Me too. Me too. And I actually had a check written. Jason Kirby (08:47.458) No! Jon (08:53.884) and didn't do it and people say, my gosh, that must kill you. And I say two things to that. One is, no, it doesn't kill me at all. I've been so lucky. But the fact that I even had a chance to do that, that's pretty amazing. And by the way, all of us could have invested the IPO or when the stock got crushed and done incredibly well. Jason Kirby (09:22.197) Yeah, exactly. Jon (09:22.852) So the fact that we get second chances at these things and third chances and so forth is pretty amazing. You know, it's funny, one of my very first investments was in a company that's still around. I mean, talk about a journey is a company called Evite. I don't know if you're familiar with the electronic invitation company. that team was a great team. Jason Kirby (09:44.918) Yeah, that's one way to say it. Jon (09:51.203) That team has gone on to do incredible things and still continues to do great things. And I knew that was a good team. And it's funny, but here's, and I'll bring this up later, but that deal represents the misalignment between early stage angel investors and larger institutional later stage investors. Because what happened there was we got We got a buyout offer of hundreds of millions of dollars. And anybody at the time really didn't have a revenue strategy. It was, let's get out there, let's become the de facto invite service on the web, and we'll figure it out. And without naming names, we had a really nice offer, and the institutional fund who came in later, who had a bigger market cap that they had to get a multiple on, said, no, no, we're going to be a billion dollar company, right? Now, if we had taken that offer as an angel investor, I would have been set for life. Jason Kirby (11:07.394) No. Jon (11:08.58) No, really, I mean, so that's a good example of where that's not alignment, right? But that was a good company and it was a great team. And by the way, just for a side note, I can't show it. I wish I had a photo, I, as part of my enthusiasm for that deal, got a Volkswagen bug in 1999. and covered it in an e-vite wrap with polka dots. And that's still my only car. And my daughter is like, dad, you've got to get rid of that car. It's not even safe anymore. So, but I kind of love it. And it reminds me of, you know, what it took to be part of deals and what doing deals back then was like and my passion for it. Jason Kirby (11:41.933) Yeah. Jason Kirby (12:06.07) It still has the rap on it? Jon (12:07.78) Still has the wrap on it. I'm thinking about doing a raffle and giving all the money to charity. So maybe $100 tickets to own the e-bike car. Jason Kirby (12:17.07) That's pretty fun. Yeah, I don't see the raps as much as you want to Rapify, yeah. Jon (12:23.076) That was a business model too that didn't work. Jason Kirby (12:31.146) San Diego startup, believe. all right. So, you know, had one, I completely agree with you. I think there's something you mentioned a couple of things that we could definitely go into tangent and talk about in terms of current markets, the second bite of the apple, which doesn't exist anymore because companies are taking so long to go public and or not going though. There's so many founders are just like, why, why should I go public? Jon (12:32.994) Right. Jon (12:56.994) Well, or to Jason, sorry to interrupt, but what about the notion that founders, I remember the first time I heard a founder taking money off the table and thinking, that's crazy. They can't do that, that's misalignment. We didn't get to the goal line. But that's now standard practice, right? So again, I just wonder about, I wonder about this a lot, which is, is, venture still the same entrepreneurial game or is it more like a mature big company kind of asset class? I mean look at all there's two types of funds now right? The bar the dumbbell there's the emerging manager seat and then there's the guys I want to put in hundreds of millions of dollars at the momentum point and get them public and that just feels so different for me than where we were back then. The other piece, since we're just on this subject, the other piece that I miss in venture today is back in the day, everyone knew everyone. So you kind of had to add value and play well in the sandbox if you were going to be invited to the table. Well now it's like, it's, you know, the hustle fun notion of I gotta get out there, find the deal before anyone else, take it to a bigger fund, get my cut on it. Let's get lots of deals done. Who can play the momentum game? And it's so easy to start a company, to be fair, right? Like anybody in their garage, in Starbucks, can start a company. So, I, about seven years ago after doing this for a long time, just said, I'm not sure I'm... enjoying it as much, adding much value, keeping up, and I'm not sure I'm gonna want to do it anymore. so, nor did I really understand how, what my edge was. You know, for founders listening, I always say that, what is your edge? How are you different? How are you taking a different approach? It sure feels also, Jon (15:20.608) in venture and startup land, the me too nature of stuff. mean, part of it is you would never do this before, but now it's like, well, I have an AI idea. I know there's other AI ideas, but if I can raise more money than them, maybe I can get to market faster, blah, blah, blah, blah, right? So that also, if you were doing an enterprise software company back then, The amount of servers and hardware and time it took to build the thing. really kept out many other players. And you're like, that's already being done. I guess we shouldn't do that. Or maybe there's one other competitor and we have a different approach. But for founders, like I would just encourage you to think about, you know, if you're starting another dating site today, as an example, what, like why and what, and that's not to say AI is not going to change everything. And maybe you do have a different angle, but I would just, but again, Jason Kirby (16:11.171) Yeah. Jon (16:22.168) There's so much money. The other piece of this, and I'll stop talking in a second Jason, but the other piece is the market validation is not very rigorous anymore because there's so much money. So one of the things that kind of unspoken about venture before was, Hey, if you can't raise money, it's probably the group of sophisticated investors. While not always right are saying, and Not an idea we want to back, the market has spoken. Well, the market is so much more forgiving and so much bigger that a lot more deals are getting back that never would have gotten back. By the way, this is all a setup, just to give you full transparency. Jason Kirby (17:08.206) I'm seeing the transition of why not venture to search funds. Jon (17:15.343) But I'm being transparent. Jason Kirby (17:17.964) No, and I sense that sentiment. like, honestly, it's, I'm spending so much more time educating founders not to pursue what's now venture in so many categories, because it's just a completely different ball game and founders. It's not a perfect fit for every company. And so there's definitely a place, a time and place for the venture market today. But as an emerging manager, like I looked at starting a fund. One of my most viral posts is me thinking myself for not doing a fund. Uh, you know, and the venture landscape right now, it's just, it's, it's brutal out there when you have these mega funds gobbling up whatever it was, like 80 % of the capital. And then you got, you know, thousand plus emerging managers trying to scrape for 20%. Um, yeah. And yeah, everyone's trying to, cause it all sounds great, but Jon (18:03.3) 10,000 it feels like, but yeah, exactly. Jason Kirby (18:09.772) It's hard. It's hard to get the capital and it's hard to differentiate on deal quality. As you were mentioning earlier, like you can be the most excited about a deal in that moment, but a deal could, you got 10 years before it's going to be anything. And you know, anything can happen. Jon (18:23.384) Well, wait, 10 years? Now, literally, it's 15 to 25. I mean, it's, again, how does that make any sense? I guess, when you're my age, 25 years sounds like a really long time. Jason Kirby (18:33.272) So I guess great. Jason Kirby (18:39.054) Well, let's talk about the transition. You you kind of put your stake in the sand on where a venture is today and how much it's kind of shifted. Before we talk about search funds, I think I want you to educate the audience on what is a search fund and how do search funds work. Jon (19:01.412) So in layman's terms, search funds are where an entrepreneur goes out and seeks or searches to find a lower market acquisition, for the most part, mom and pop companies, $2 to $5 million in EBITDA, and acquires it, and then runs it. That's been the traditional search fund model. Now search fund is a term that's getting fantied around a lot these days. in terms of what Agate Hound Fund focuses on, we focus on the very specific, niche-y, formalized playbook of that process. Let's not go there quite yet. Let's just talk about the fact that we are in the biggest demographic trend in the history of the world with the baby boomers. And there are tens of thousands of companies that have to be transitioned to a next generation or be shut down over the next five to 10 years. And so, and these are companies, not all of them, but a good size subset that are successful product market fit companies making money that with an infusion of intelligence and energy and potential tech tools could go to the next level. But again, they're not sexy, you know, and they're not in glamorous places always. So, you know, the HVAC company in Topeka could be a really great acquisition, right? The street cleaner in Modesto could be a great acquisition. The dental clinic in Cleveland. You know, I'm giving you examples of the types of companies we're talking about here. Don't... Jon (21:18.712) go and do a search fund if you want to go to a cocktail party and have the sexy conversation, because that's not what we do. But sexy is all in the mind of the beholder, and it's these return profiles that we've been seeing. If you look up the Stanford study, I would encourage anybody who's interested, by the way, as a resource. Stanford has two very important documents. on their website, the Stanford primer on search funds and the Stanford study, which updates results every two years. The traditional search fund model are now called ETA, Entrepreneurship Through Acquisition, has been around for about 40 years. And the headline that everyone fantasies about is over that period, if you've done every search, and remember a search is where one or two of these top MBA graduates go out to find the company, which they don't, by the way, always find, and then acquire it and then run it. And if you had done every one of those, the ones that worked, the ones that didn't work, the ones that didn't acquire, all of them, you would have approximately a 35 % net annual return. That is kind of mind blowing. That is mind blowing. Warren Buffett, I think is at about a 20 % net annual return. I don't know of anything else that has produced returns like this, but let me be really clear. It's super niche and it's hard to access. And people are saying we're doing search funds and like any maturing asset class, the definition is kind of getting fuzzy because anybody and like any maturing asset class, it's finding variations on the model. as you would expect. More people coming in, more money coming in, other ways to acquire small companies, blah, Ag and Home Fund, we focus on a very specific version of this, a very formal playbook. But the bigger point is you ask what a search fund is, it's this notion of going out and finding a company where you can buy it relatively cheaply, grow it, and sell it to private equity. That's the exit. Jon (23:48.29) and a higher multiple once you've professionalized it and grown Jason Kirby (23:52.248) So going into that, when you talk about cheaper, let's talk about multiples of what you're seeing. So you're talking about the cleaning company or like HVAC company in Topeka, the cleaning business in Modesto. What do you see these evident multiples? And I imagine it's even multiples. What are you seeing in the market? Jon (24:12.386) Yeah, yeah. mean, it's all in the study. So I'm just quoting the study. But also what I'm seeing is, you know, four or five times EBITDA multiple. And again, kind of one to five in EBITDA and growing it and getting eight to 12 times on the exit. Right? Because private equity, first of all, buying a business sounds sexy. Cody Sanchez is out there telling everybody how easy it is. Jason Kirby (24:42.574) Thank you for coming around. Jon (24:45.22) It's like the no money down real estate stuff from 25 years ago. And people said, oh, I'm going to do this. I'm going to build my wealth this way. And 95 % of those people ended up hating their life because it's really hard. Jason Kirby (24:58.03) Well, you see the new SBA loan changes. For those that are not up to date on SBA lore, when it comes to big changes, because there's been such an increase in defaults in SBA loans, because of this no money down, no risk, 5 % minimum kind of stuff, they've basically put all these enforcements into new rules in the SBA criteria in order to qualify. And it pretty much eliminates a lot of that. I don't know if bottom feeder is the right word, but like these kind of like fake tea, fake it. Yeah. Jon (25:34.671) Well, it just took the risk, right? And you know, the traditional search fund model uses leverage, but it's conservative. And we tend to get part of our leverage from the seller. So there's skin in the game. So there's transition. So there's mentoring and coaching throughout the time where the new CEO comes in. So anyway, You know, we get to buy these things at a lower multiple because buying a company is hard. Getting a seller to sell is hard. It's messy. And the thing that happens with the traditional search for a model is that they go to Harvard or Stanford or Wharton or MIT or Booth or Northwestern and they actually get classes on how to do this. They are trained. on how to search, how to talk to sellers, how to think about the &A process, how to run that company. And they have actual case studies of all the people who have gone before them who have done it and what they've learned. And the pattern recognition around this stuff has gotten really good. And I think one of the most powerful pieces is the community is not just about making money. It's very much about coaching, mentoring, training, and teaching. that is a very, I mean, YPO has something called a YPO forum. Why? Because when you have a group around the table of peers that you have to be accountable to, when you have a group of people who can give you advice who've been through this, that's better. It's like a personal board of advisors. That's you're going to be more successful and that is built into ETA. So when people go out and buy and say, I'm going to go buy a company on my own, I think good luck. mean, you're making it harder. I mean, that's a hard thing to do. And sure, people have been successful doing it, but, but why not put the odds in your favor to start? And, and so that's why I get super enamored with this. Jon (27:59.253) asset class I'll call it and this playbook because it reminds me of venture when I started venture. There's alignment, there's entrepreneurship, there's the notion I'm going to figure things out and climb the mountains and if you think about who is doing the search it's a very specific type of person. It's a person who maybe a first generation immigrant. It may be a military person who understands discipline in a playbook. It may be a child or children of entrepreneurial small businesses families where you sat around the dinner table and talked about this stuff. What it generally isn't is the kids who went to the Hamptons on the weekend and had the country club membership, right? I mean, that's fine too, but... It's it's gritty. It's someone who's gritty. It's what I said about Microsoft. How tenacious are you? What's your ability to figure things out? And what's your passion for winning? And I think that's, you know, if you're asking me who do we like backing, it's those kinds of people. Jason Kirby (29:16.782) And so we took an ETA, the strategy we've been talking about, you've decided to focus on a fund to funds as your method of kind of access to the best deals and the return. So why did you choose a fund to funds as your model? Jon (29:37.797) Because I wasn't a member of the club, is the short answer. But let me step back, not to be glib. First of all, fund-to-funds in general, if you look at other asset classes, have done better than trying to select the winning funds. And there's a reason for it. And that's statistically true. Fund-to-funds have outperformed over and over. of people trying to figure out which fund's gonna win in any vintage year. So in one of our funds, we're gonna invest in the institutional funds that invest in ETA. At the end of the day, a fund, Ag and Home Fund will have something like 200 small American business acquisitions run by these top MBAs in over 100 different industries across North America. So we are essentially the ETAP or index fund for the greatest asset class in America. America has a lot of strengths, but you know, if you look at what makes America great, it is small business. We are the star of the world when it comes to small business. And why is that? Because we have a big economy and we have rules in place. And if you generally work hard and follow those rules, you can win. And so that's why we did this. I mean, I did it because as the largest investor in my own fund, I did it because this is the asset class I wanted access to. So when I started this seven years ago and 20 search fund conferences ago, I went to the funds and I went to, well, I didn't, I started going directly to searchers and they, said, geez, you seem like a smart guy, but the cap table's full. We already have our 12 investors, and they're the ones teaching us the class at Harvard and Stanford. They're the ones who have a track record. They're the ones who have done hundreds of deals. They're the ones that had a search and successfully exited. So, you know, thanks, Mr. Tech BC guy, but I'm not sure where you come in. Jon (32:02.54) At first I was like, wait a minute. And then I said, I respect that. You should get people around the table that can directly help you and immediately help you. And I said, I've got to pay my dues. I've got to learn the asset class. I've got to figure out how to add value to the asset class. But in the meantime, there's some great funds. So why not invest in the funds and create the first fund to funds in the asset class? So that's why I it. Jason Kirby (32:33.964) Yeah, I think it's valid reason. think there's often a misconception of, you know, fund funds and the double dipping of fees and all that kind of stuff, but there's, pretty good strategies to get around that. and so one thing that we, we haven't talked about is, we kind of talked about our search funds, the, you got into search funds versus venture. but your entire career, you've been hosting events, bringing people together, bringing founders, investors together. Tell us a little bit about that background and what you've been doing on that front and hosting these private dinners and get togethers. Jon (33:09.28) Well, I'm going to bring my wine business into this a little bit, about, gosh, even when I was at Microsoft, I decided one of my superpowers was going to be community and connection and networking. And not just for myself, but because I truly like people and truly know good things happen when you bring people together. Magic happens in unexpected ways. And even back then when I was in Seattle at Microsoft, I was putting on something called Schmooze Fest, which were the, mean, these things got so big in Seattle. think the last one was over a thousand people and we ran out of places we could do it. I think it all comes from when I was at Stanford, I was an RA in four different dorms. So I kind of realized early on. I enjoyed putting together events and getting people together. But so even back then I was doing these schmooze fests. And I decided that also early on to be a LinkedIn user. think I was one of the earliest LinkedIn users. And I just said to myself, if we can create community, that's good for everybody. And so 18 years ago, when I decided to go into the wine business in Argentina with hand of God, I said, I'm going to continue using community. and dinners and introduce the wine that way because what's a perfect match and pairing is good wine, good food, good people. you know, update today, we've done over a thousand dinners that included the wine. And even though I sold the winery this year, I'm going to continue doing the dinners because magic happens. So last week, Jon (35:14.988) I did three dinners in San Francisco. And I'm still doing it with the tech people and with venture, because I love learning and I love seeing where AI is going and tech is going. But we also did a dinner for the search community and tech and AI, and we'll be doing more of that. And so I want to bring that together. And it's just a... cornerstone really that matches and merges all my interests and I think creates some goodness in the world. Jason Kirby (35:54.446) What kind of line did you make? Jon (35:55.781) Good one. I was lucky to go to school, there's a school with a very talented winemaker from Argentina and he actually makes the wine. I schlepped the cases. As I've gotten older, they've seemed heavier. But we make, of course, Argentina's Malbec. So you got to have a Malbec. But we did a lot of Jason Kirby (36:16.472) Yeah. Jon (36:25.592) different things and we won't go deep on the wine business and why it's so hard. But fortunately, I made a little money on the thing so I get to check that box, you know? Everyone in the audience knows the old joke so I'm not gonna repeat it about how you make a small fortune. But it's been amazing. It's been, I mean, first of all, wine regions, know, golf courses and wine regions are two of the most beautiful places in the world. So I don't play golf, so I chose wine. And I've met amazing people, I've had amazing food. I've just, I love wine because of the culture of wine, the history of wine, the unending learning around wine. And even though I've sold the winery, I hope to always be involved in some way. And just wine reminds me and... hopefully others to slow down, appreciate the good things in life and celebrate life. So that's what it's about. And I try and bring that to my work. I've always tried to merge all my interests. Because when you do that, the more you can bring into your passions, your interests, your hobbies into one thing, it doesn't feel like a burden. And that's always been, I've been lucky enough to create those things. Jason Kirby (37:50.136) I think it's a valid story. also just, I love the merging of the things you love. And I think that's something that I got advice early on was, with my very first business was, you know, do what you love and kind of bring the pieces together. cause then it's a lot easier to have the grit and grind to just stick with whatever you're doing. so when it comes to your experience and, you know, going from early stage investing, for 20 plus years, almost 30 years now, and going into where we are today. I know you're focusing more on ETA, we'll call it the boring businesses, as Cody Sanchez loves to call them. Are you still looking at what's happening today in early stage venture? Are you still active in any of those capacities? How's your portfolio doing these days as it's taking longer to mature? Maybe give us a little bit of insight to that. Jon (38:48.184) You know, one has to be careful when proclaiming that the present is different from the past, but it feels different. I have to say, I think I have lived through a lot of change in this world and the rate of change that I am seeing is mind boggling. And you we won't get into the good, the bad. but it is not going backwards. are on a path here and it's going to impact, I think, not only the rate, but the comprehensiveness of the change is astonishing. There is not almost a day, but I'll say there's not a week that goes by where someone doesn't show me something using AI that I am officially mind blown. I mean, there are just so many things happening that's gonna change work, play, outlook, culture. It's really astonishing. So I do not want to. I do not want to not be part of that too, but I can't do it all. So I invest in funds and fund to funds in venture and I keep my community dinners together. I think it's an exciting time. mean, look, that the world, we're gonna see new companies being built. I mean, trillion dollar companies, how crazy is it? I mean, we take it for granted. But now we have what, four $5 trillion companies. I mean, in the next 10 years, we may double that. That's insane. mean, just so, it's again, mind blown. And yet we can scale now. And so I'm excited for, but I'm excited for what's about to happen. But what I want to say is I learned early on, if you want to get to the front of a parade, at least for me, Jon (41:01.176) Don't go through it, go around it. So I just, to the founders out there, figure out what's your edge, what's your differentiation, because a lot of people are seeing the obvious things right now and kind of all attacking very, very similar things. Jason Kirby (41:19.82) have this theory that AI actually drives us all towards the mean. Because if everyone has access to the same... Jon (41:27.468) A democratize me. Yeah, for sure. Jason, I think that's right. And so sometimes I think about it, not about like, well, what's obvious in the big picture, but where could I be that would make a difference? Maybe I shouldn't be in San Francisco if that's where everybody is. Or if everybody is using AI to do something, maybe I need to think about what's old school. That right, mean, honestly. Jason Kirby (41:58.616) Pen and paper. Jon (42:02.424) Well, one of the things I do want to say about that is that if you think about your competition in an HVAC company in Topeka versus your AI startup, it's wildly different. And you may want to compete with the 65-year-old guy who's not going to embrace AI or tech in Topeka versus every CS graduate from a top undergrad program who's coming out to do a startup. That's what I'm Jason Kirby (42:40.541) Topeka HVAC with AI. No, think it's going to be very interesting future. think the mean ultimately goes up substantially, but again, we all gravitate toward the mean. And there's going to be that question goes back to what you're talking about. What's your edge? How do you stand out? What's going to make it a little bit more special, whether it's proprietary data, access to capital. Jon (42:42.648) There you go. Jason Kirby (43:06.988) you sometimes a huge factor. talked to many founders that all have great ideas, but they can't convince people to part with their money to back them. Then that's a major disadvantage to, to many. and then before we, we part ways here, what kind of trends are you seeing as we were kind of talking about this topic of AI and where things are going, what do you kind of have on the horizon that you're betting on right now? outside of obviously the ETA strategy, but anything else that comes to mind that you're closely attuned to. Jon (43:44.419) I'm going to be a little contrarian here. I'm not on the forefront. I can't tell you what the next space launch program is going to be or the next LLM or the next breakthrough in medicine. One of the reasons I am doing what I'm doing is because I can't predict anymore. I used to feel like I could. What I can predict is that we're going to need the plumber. I know that sounds silly, but there are some essential services I know we're going to need. And in a world that feels as topsy-turvy and tumultuous as I've ever witnessed, I'm trying to go to where it feels like there's some certainty and not trying to predict what's next, because it's never been harder. And so... If you look at the history of search just to bring it full circle, it's never, as I'm aware of, had a down year. One of the characteristics is you're buying a profitable company. You don't need a second round. Right? You don't have to get liquid. You don't have to sell it if you're growing it and it's profitable. So I'm really comfortable in one professor said there's riches in the niches. Jason Kirby (45:12.098) Ha Jon (45:12.496) I am thinking all about how can we, and some people say to me, how do you invest in AI? I'm super interested in AI for small business, because that's going to be the last area that's going to get AI. The big companies, those that have a lot of money are going to be able to adopt this thing, innovate really. The small mom and pops who are always drinking from a fire hose. are going to be the last ones to do it. So I want to bring that mindset to that world. I think small business will change a lot. I can't sit here and give you my crystal ball beyond that. But I'm excited as hell about the world that I am focused on investing in and spending time with entrepreneurs that inspire me every day. Jason Kirby (46:08.654) Well, John, it's been a pleasure having you on the show. What would be the best way for people to get in touch with you to continue the conversation with you if they wish? Jon (46:18.104) Yeah, I hope they do. I am obviously not short of enthusiasm for search and ETA, but aggithound.fund, aggithound.fund a gem, and we grew up with Irish wolfhounds, is the website. John at aggithound.fund. And, you know, they can reach out to you and feel free to share my contact info with anybody. It's a pleasure, and as I said, I think this is gonna be a really fun next decade from that perspective. So thanks, Jason. Jason Kirby (46:56.846) Thanks to you, and thanks for coming on the show, and appreciate the time. Thanks. All right.