My guests, ^Searchfunder member‌ and are the co-founders of Evermore Industries, a holding company looking to acquire industrial service companies with a time horizon measured in decades. Justin and Ed also happen to be the co-founders of the Stanford Search Fund Club during their time at Stanford. They hosted over 20 events and met professionals all across the search space and used that experience to shape what they wanted to create with Evermore. One interesting podcast connection, Westerly Group, through podcast guest Ross Brendel on episode 57 and co-founder Rich Littlehale, are investors in Evermore Industries, among other long term investment vehicles.

During our conversation, we talk about their time running the search fund club at Stanford, their views on search funds, how they raised capital for Evermore Industries, and benefits of being acquirers with an ultra long term view.

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If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at Or reach out to August directly at in sponsoring? Send me an email at Transcript:

Well thanks Justin and Ed for joining the podcast. It’s exciting to have you guys. We’ve talked on and off for a long time here, and I feel like I’ve gotten to know you guys really well. So it’s weird that it’s taken this long to be on the podcast, but I’m excited to finally have you here. I want to hear about your backgrounds and your time at Stanford running the Search Fund Club. And now with Evermore Industries. Justin, do you want to go first?

Justin Vogt:

Absolutely. And Alex, thanks for having us. It’s been fun to get to know you and watch the podcast crowd. I’m thrilled to be a part of it now. By way of quick background though, and hopefully to help people keep voices straight here, this is Justin. I’m originally from a very small rural town in Southern Illinois, went to undergrad, went to Notre Dame, which you’ll hear from Ed as well here shortly. But I was a finance major, moved to Boston, spent several years as an investor with Bain Capital out there. Ultimately decided I was a little tired of sitting behind a computer screen and Excel sheets all day every day, and wanted to do something a bit more entrepreneurial. Knew about ETA and entrepreneurship through acquisition and search funds through Bain Capital actually. Knew that Stanford is kind of the home of all of that and had all of the professors that had been successful, and just had a culture about it that I really loved and enjoyed.

So decided to go out to Stanford, spent two years there, graduated in 2020 and launched Evermore. You’ll hear a lot of overlap with Ed in kind of the Stanford and Notre Dame stories here. So I’ll kick it over to him and let him give his quick overview and background there.

Ed Redden:

Thanks Justin. Alex, thanks a lot for having us on the podcast. This is really exciting. So like Justin said, I’m also a Notre Dame graduate. I’ve got a few more gray hairs than he does. I graduated a little before him. I’m a chemical engineering undergrad degree and I went to work for GE in their operations and supply chain corporate leadership development program. Did rotations all across kind of the East Coast, did that for about five and a half years. Realized that a career with GE climbing the corporate ladder was not exactly what I wanted to do. Frustrated a little bit with some of the bureaucracy of big conglomerates.

So I went back to business school with the intention of exploring ETA and trying to move down market and get more in the driver’s seat of a small business. Stanford as Justin mentioned, is a great ecosystem for that. I started exploring that, going to different sessions, and did some Notre Dame game watches where I kept seeing the same guy show up. So I started talking to him, really realized that I had a strong operations background. And one of the areas that I could use a partner in would be in the finance side. So through conversations with Justin and our shared values and interests, we ended up forming the Sanford Search Fund Club. Then through that, built the partnership. And then that kind of all led to the formation and launch of Evermore.

It’s funny you mention sitting, watching Notre Dame games, and the same guy showing up. I met one of my closest friends who is my officiant in my wedding and a roommate in college for awhile. I remember hearing him just in the dorms talking about the Bengals, and I’m a big Steelers fan. So it was interesting to hear kind of a rival. He was also a Huskies fan. And as a Ducks fan, we don’t like the Huskies very much. So it was interesting to hear him a little bit. But I’d love to hear about the Stanford Search Club. So when you got there, you were both interested in search funds coming into the program. Were you looking for a club that perhaps already existed and then you didn’t find anything and decided to start it? Or what was your thought behind starting the club?

Ed Redden:

I think when I came to Stanford, I was very interested in exploring search funds and ETA more broadly. I started looking mostly at the private equity club and some of the venture capital club. And search funds don’t fit either of those buckets. So I think it was kind of roughly around the January of our MBA one year where I came to Justin and said, “I can’t believe this club doesn’t exist. We should form this club here in the spring quarter and run it.”

And there had been a lot of institutional knowledge around search funds housed in the Center for Entrepreneurial Studies. Stanford publishes the search fund study. It has the CEO conference. So there was a lot of activity in the search community on the Stanford campus, but it really wasn’t student led. And it was very narrowly focused a little bit on the traditional search fund. Whereas HBS has a very different model when it comes to ETA. So part of our exploration of the different paths of ETA led us to forming the club and kind of looking at who can we bring to campus for different info sessions? How can we learn about all the ways that you can do ETA more broadly and have a repository of that information that’s going to stand around past us leaving and graduating from Stanford?

Justin Vogt:

Ed gives the wonderful overview of how it was helpful to the school, and the institution, and all of the students. But also frankly, it was great for us. We were exploring a variety of different search fund options, trying to get a lay of the land. And being the co-founders and presidents of the Search Fund Club gave us a great excuse to get into contact with almost anybody in the lower middle market, private equity, ETA community we wanted. And we ended up hosting I think 20 plus events in about a year. We ended up signing up 125 students, have conversations with everybody from permanent equity type investment style businesses, to holding companies, to accelerators and everything in between. And it really helped us discern what we were looking to do and what we wanted out of our ETA entrepreneurship journey. So I loved it for that aspect as well. And I’m very happy to say that post our departure, that the club has only grown. The recent presidents of the club even continue to expand the offerings as far as speakers, for the students, etc. So it’s continuing to grow, which is absolutely wonderful.

Ed Redden:

We quite often get the reaction when we say we founded the Search Fund Club of, “Oh my gosh, I can’t believe that that didn’t exist.” Right? And a lot of anecdotes from searchers, “I didn’t hear about it until the spring quarter of my second year of my MBA when I took the entrepreneurship through acquisition elective.” So one of our major goals forming the club was to just kind of increase awareness and provide exposure to MBA ones to start that learning curve of what is a search? What does this look like? This is a career path that is available to me to provide that accessibility early on in your MBA career.

Are there a few folks that you know of who you were able to capture their attention early in their MBA program that have since gone on to launch search funds?

Justin Vogt:

We’re about to see a few graduate here shortly, which just given the fact that we’re only eight, nine months out of the MBA life now, the next iteration is coming forth here in the coming months. And very proud to say that the number of Stanford searchers is up, I believe at all time highs. And per what I think we’re about to talk about here for the rest of the podcast is holding companies. And knock on wood, I believe there are a couple holding companies to come out of Stanford in the next few months as well, which is very exciting.

That is exciting. You guys get to lead the charge a little bit. I’m curious as you ran through this program or ran through this club, you didn’t actually start a search fund. So I’m curious when you started the club, how did your views of search funds just personally, not necessarily your objective view, but how did you personally view search funds as you went through the club and you saw the different models available, and started to think about what you yourself wanted to do?

Justin Vogt:

The conclusion I think we both came to was the fact that search funds are great. Traditional search funds are fantastic. They’re incredibly well set up. Self-funded searchers and search funds work fantastic. It’s really about sitting down and defining what your goals are and what you want to get out of buying a small business, and operating a small business, and investing in small businesses.

So as we explored and talked to a lot of different people in the community, it became clear that what we were looking for was more of a holding company structure. A structure that allowed my background and my desires, which are a little bit more on the investment side. Looking at acquisitions, talking to business owners about an acquisition and different financing options, etc. Whereas Ed was looking to get a little bit more of the operations side of the house under his purview. The freedom that was allowed to us by raising a holding company rather than a traditional search, which is buy one business, operate it, sell it. But rather kind of having a holding company whereby we could continuously invest and operate over many years and hopefully decades to come. Just suited what we were looking for greater than some of the other models.

Ed Redden:

We are big advocates of all types of ETA. There’s no wrong way to do ETA. And you really, it’s just a selection of what is the best path for you as an individual. So some people may read into the fact that we didn’t do a traditional search fund as ours as a holding company is better. And I believe that because that’s what we chose. It’s not better for everyone. It’s not the right decision for everyone. And that was one of the big things that we wanted to instill through the club was there are a lot of different paths here. And you need to kind of do some self-reflection to figure out which is the right path for you.

Justin Vogt:

I often get asked, “Why did you do a holding company? Why is a holding company better?” Which is the framing of the question that I just disagree with. I think a holding company fits what we are looking to do in an incredible way. I think for a lot of MBAs, non-MBAs, just others in the community that want to go out, search for, find, acquire, run, and then sell a small business, that can be a fantastic traditional search fund model person. That fits that model incredibly well.

So there’s no best model, but rather there are models that fit different personalities, different goals. And the process that should be going through or the question that should be asked amongst people that are discerning their path through this environment through this industry is which of the models suits me and what I want.

The accelerators, there are a few accelerators now, are absolutely tailor-made for certain people. And that’s great. You should absolutely go do an accelerator if you’re the type of person that wants that community, wants that support, wants a single confessor most of the time. That works fantastic. Go do that. If you want to buy a smaller business and you have the financial wherewithal to purchase it significantly on your own, a self-funded search can be fantastic. Go do it. There’s no need for a holdco if that’s not your goal. So the process and part of what the club is for, and hopefully kind of what I stand for in the community is finding what is best for you. And I’m happy to carry that flag and point people in directions that are different than what we decided to do, because their goals are different than ours.

Yeah. Leading into Evermore, I’d be curious to hear how your thinking evolved into designing that holding company model that you’re now running today. How did you think through?

Justin Vogt:

A lot of it came down to what are we trying to get out of this journey? And in reality, we sat down and said two things. One is we want to make a career out of this. This isn’t a five or a seven year journey. But this is something that we want to make a commitment to for decades.

And the second is we’re not focused on an exit or a payday in five to seven years, but rather building something that we are proud of as our careers work. So that guiding light sat there and said that may or may not fit a lot of the other models, but it definitely fits a holdco. And the freedom, the time horizon, the ability to bring certain investors and people on board where it’s incredibly aligned with what we were looking to do. So we met those people, became involved in the kind of subset of the ETA community that is holdcos, and ran with it. Loved the people, loved the structure and the design. And that just snowballed to where we are today.

Ed Redden:

I think that a lot of early conversations when we were sitting there looking at a blank sheet of paper after being very familiar with the search fund kind of model, we asked ourselves, “Okay, if we did do a traditional partnered search and we had a great exit in five to seven years, what would we do next? And how can we solve for that today?” So that kind of led us down this path of more permanent capital structures. And some of the trade-offs we made around permanent capital required Justin and I to be patient and intentionally think long-term and put structures in place that really rewarded long-term reinvestment to really build this flywheel that would compound both financially, but also on the human capital side some areas that we said were maybe gaps in the traditional search fund. Like we’ve mentioned before, the loss of your pipeline, the loss of those two years of searching, and all that time invested building relationships. In an evergreen structure, you can continue to reap the benefits of that in relationships where someone said, “Hey, I’m not ready to sell now, but check back in three years.” That now is an opportunity for us to add to the Evermore holding company portfolio, if the timing worked out.

Yeah. Can you talk through a little bit about the capital raising process for Evermore?

Justin Vogt:

The capital raising process was long. It took a lot of time. It took meeting a lot of effort. It took meeting a lot of different people. But it was also an immense amount of fun and led to us getting to know a lot of people that I can’t imagine we would have ever met before or would have met in any other context. So for us, capital raising was about finding people that aligned with what our vision and our goals were.

So that came from reading books that people had written. That came from reading case studies that people were involved in. And being able to have really good, really productive conversations about how people thought about business, how people thought about investing, how people thought about building something that they were proud of. Most of our investors by their nature, or later in their careers. And they sit there and ask maybe what would I have done a little differently to ensure my legacy through business? And it’s something that we want to be conscious of over decades.

So it took a long time. And I would say our capital raise, there was very little conversation about a pitch deck. We had one as a way to orient conversation, but that wasn’t the point. The point was getting to know the investors, ensuring values, and coming to a similar conclusion as to what we saw as success. And mind you, we were told no many, many, many times. And that’s okay. The goal here isn’t to solve for the highest hit rate possible, but to solve for having the right people that think of success in the same way that we do. And I like to think that we found that.

Ed Redden:

I would add that the first step in any capital raise process needs to start with you sitting down and figuring out what it is that you want to do. Especially in ETA entrepreneurship, you are the entrepreneur in this sense. So you need to kind of define what it is that you want to do. And then we went out and we asked, Justin asked a lot of people for advice. “What do you think about this thing that we want to build here?” And that’s not fundraising. That’s relationship building. That’s being coachable, getting feedback, and trying to figure out okay, how do I bring this into fruition? So by the time we were actually asking, “Would you like to back us on this journey?” We had already built those relationships. Those people knew what we stood for, what our vision was, who we were as people. And they were more than happy to back us to kind of say, “Yeah, I’m on board with exactly what you built.”

What do you think was some of the most meaningful advice you received during that fundraising process?

Ed Redden:

In a search fund, the first step is very clear. It is a defined path. It is a seven year, two years searching and then invest in an exit. If that’s not the full playbook, the questions around how many companies in the portfolio are these separate and distinct, are you doing a roll up type strategy? Really defining what the vision would look like over that much longer term horizon. I think there were some thoughtful questions around, “How many companies are you guys looking to acquire? What pace are you looking to acquire them? Are they all going to be the same such that you can kind of build vertically, or are they going to be distinct verticals and get some diversification?” That was something that I think was just a productive conversation when we were thinking about the early stage formation.

Justin Vogt:

The best advice I think we received through it was this is an entrepreneurial journey. Be entrepreneurs. Make of this what you want to make of it. Build the company that you have in your mind, and bring that vision into reality. No one here is trying to be a cookie cutter entrepreneur. That’s not the goal here. What will make the difference is that you are motivated and you love what you’re doing. If you’re excited to still get on the third flight of the week because of what you’re building, that is the biggest factor for success here. So take that entrepreneurial energy and run with it. And if that’s in a holding company of one, if that’s in a holding company of a dozen, what have you, be an entrepreneur, focused on what makes you happy and gives you energy. And if we can keep that and focus that through a holding company, that’s what will ultimately lead to success. Not any given legal term, or structure, or MOIC hurdle, but rather that energy, that drive, that ambition. And getting alignment with everybody on what that is what will make or break Evermore or any other entrepreneurial journey.

Ed Redden:

Yeah. When we thought about the cap table, who we wanted to go on this journey with us, how much money did we think we would need? We were very intentional about not solving for a dollar amount, right? We knew we needed enough to get started. And we knew we wanted certain people, a small group of people actually around the table with us. And that meant not sacrificing exactly what Justin mentioned about our entrepreneurial desires just to get a dollar amount. I’d rather say no to an investor who was kind of saying, “You should look at more software type businesses.” “Justin and I are not software guys. So if that’s what you’re interested in investing in, that’s great. But it’s not going to be a right fit for us.” So just to re-echo his statement, not compromising on what you want to do as an entrepreneur just to reach that fundraising goal.

Justin Vogt:

The comment I would make on fundraising is the amount that is required is the amount that gives you confidence going out into the marketplace. And for us, that meant definitely in excess of the amount of equity that would be required to fund what we anticipate being the first acquisition. But not so much as to think that we would never be able to deploy it. Because the goal was to have the right group of people around. And frankly, if we have great success with this and we want to raise more capital because there’s more great opportunities to invest, we make the assumption that that capital will be around and will be available to us when that time comes. And because we’ll have the right people around, we’ll have built the right systems, we’ll have alignment. And the total dollar figure is not the driver of results here. The percentage of fees is not the end result here. That’s not the goal.

Ed Redden:

Justin is exactly right. You need enough money to get started. But when you’re capital raising, you’re in your weakest negotiating position right here at the start. Justin and I are two unproven entrepreneurial guys. So if we’re successful, we’ll be in a better position to raise additional capital later. So there’s no world in which we raise a ton of money here at the start, we perform poorly, but thank God we raised a ton of money here at the start. We got all the terms that we wanted. You’re in this weird dilemma. So the things we could solve for, we did solve for in terms of enough capital to get started in having the right people that we respect and we wanted to be on a long-term journey with. Then you’re in the game. Now go, and success will breed success.

I’d also love to talk about your specific industry focus. So what made you choose industrials and that service focus? And then I’m curious too, because that process and that focus has evolved for you through a number of different industries and different areas. I’d be curious to hear a little bit about how that journey has gone since you started.

Ed Redden:

It was a natural fit for Justin and I to look at industrials and industrial services businesses based on our background. Based upon the fit with what we were best suited to be entrepreneurs and run over the long term.

Working at GE, I was on the shop floor managing teams, assembling tangible products, providing actual services. Justin was investing in those kinds of asset intensive businesses. But it also really aligned very well to kind of our Midwest roots, how we valued and how we looked at businesses very much on a cashflow, not on a growth potential more VC, not profitable yet, but super big potential in the future type businesses.

So we’re very much old economy, more patient, more consistent growth that scales and is sustainable over the long term, that just fit very well with who we are, what our backgrounds were, and where we wanted to kind of build Evermore from.

Justin Vogt:

The evolution of the industries of interest has been an interesting one. It is a Venn diagram, whereby one circle is businesses we are incredibly excited to go acquire and own forever. So that needs to fit with our personalities and what we enjoy doing. The other circle of the Venn diagram is around business quality. And being an incredibly robust, sustainable, hopefully growing business for the next several decades. And it has been very fun.

And I’ve thoroughly enjoyed the process of working through very niche applications of industrial services across the country, and in particular across the Midwest and the South. So that has led us to spend a lot of time looking at as an example, maintenance and repair businesses for high value assets. That can be anything from a CNC machine on a factory shop floor. That can be a maintenance business for MRI machines. But it’s really about those types of businesses being the center of the Venn diagram for us of being create businesses, but also being businesses we’re incredibly excited to run because of the people that are involved in them. The types of people we want to manage, the types of people we want to work with, the types of people that we want to invest in over the coming decades. And finding that fit and trying to get as tight of a circle around what we are looking for is a process that takes time and is a process that takes learning. And we’re on that process. And it’s a fascinating fun, and frankly very fulfilling process to go through.

Do you want to talk about a few of the most interesting or unique niches within industrial services that you’ve come across as a result of this? I know we had a Twitter thread a little while ago where you talked about, I mentioned a goat business in that Twitter thread, and you mentioned another goat business. So I’m sure that’s not one of them fits in the industrial focus, but I’d be curious what interesting industries you’ve come across.

Justin Vogt:

The goat businesses are fun. That was just a fun one that I’ve run across in my day-to-day life. As far as specific niches, it’s incredibly specific. And I think some of the businesses we love and have a desire to own forever are businesses that have rather small TAMs to contrast ourselves with venture capital again. If you’re running a business that services, and maintains, and repairs a very subset niche of laboratory equipment that tests the hardness of certain metals, wonderful. We’d love to talk to you. There might be one in California, one in Illinois, and one in New York. And that’s fine by us. We’re super excited to go own one of those businesses, be a partner at that business for the long term. So I’d say we’ve run across everything from CNC spindle businesses to hyperspecific medical equipment businesses. And the more niche, the more off the run, you didn’t know it existed before you got on the phone or you saw the website, the better in our opinion.

Ed Redden:

I think Justin mentioned some of the interesting ones. I’ve also been really fascinated or surprised by some of the preventative maintenance businesses like the vibration analysis businesses. Basically, your doctors for industrial equipment that come out with a vibration stethoscope to figure out why is it wobbling, or vibrating, sounding funny. Those have been really interesting businesses. There’s interesting applications of different sensors and technology for remote monitoring that is really emerging in that space that I found creating some very compelling business models. Justin mentioned some of the laboratory equipment space, some of the research laboratory stuff. I have enjoyed looking at some of the ultra low temperature freezers and refrigerators that laboratories are using that have become in vogue due to the COVID vaccines needing refrigeration. So some of those repair maintenances businesses and the temperature monitoring around them are also just really fascinating businesses as well.

As you’ve gone through and continued to talk to owners, have you found that your permanent holding capital, committed capital model has resonated and made you stand out amongst other buyers?

Ed Redden:

We have. I think that a certain subset of owners are looking for a more permanent long-term solution for their business. They’re not deal makers. They have never transacted a business before. They’re founders of their legacy that have been in this business for the past 20 to 30 years. And to think that they are going to take that life’s work and now have it get swallowed into a bigger strategic acquirer or a competitor even doesn’t sit right with them. Thinking of entering the private equity cycle of buying and selling businesses every three to five years on that kind of a timeframe, also not appealing to them. So we do get a lot of responses from owners. “It’s the long-term nature of your business. I like the fact that you guys are willing to relocate and come get hands-on in the business.” So I do think it is at a very bit of a differentiation from different buyers on the market.

I’d also be interested to hear if you’ve found that with some of your owner outreach, since you have an indefinite time horizon, are there different or unique ways you can approach owners that searchers today who have a very short time horizon to buy something are not able to do?

Justin Vogt:

Absolutely. I mean by being permanent, we are the antithesis of churn and burn. We want to build relationships. There’s still an element of get to know quickly. And you don’t want to waste your time. But for industries that we’re particularly excited about for niches where we’re spending a lot of time, I’m happy to get to know somebody even if they’re not ready to sell their business. I’m happy to get to know somebody if their business is too small or too big for us to acquire. Because when you have the anticipation of being around an industry, being around a geography for 10, 20, 30 plus years, those are the things that are going to drive value for your business. Those relationships, that reputation you carry. And if I have the ability today to do that on an owner call, we are absolutely going to do that.

And that’s pretty different than a typical search fund who the 24 to 30 month clock starts ticking on day one, and you probably don’t have that privilege or that patience. And we’re more than happy to do that. And just tactically, we have a CRM that we plan to live on for decades that’ll have a lot of notes and conversations with an immense amount of people, hopefully over the long term. And I would like to think that that CRM, and those notes, and those businesses is a great asset for us in the year 2030, the year###-###-#### And I think we have the ability and the privilege to be able to take our time to build that.

Ed Redden:

For any searcher, your most valuable asset is your time. So as Justin mentioned, we’re not wasting time with unqualified sellers, or we’re not just talking to build relationships and be nice people, although we are. But the goal is moreso if you’re not ready to sell today. And you’re like, “Okay, I’m exploring my options, but I’m looking to sell here in a year, two years, three years.” That’s very valuable for us to build that relationship, to check in every six months or every year to say, “Hey, how’s the business progressing? Where are you at? How’s your thinking evolving?” Specifically in contrast to a searcher who’s a little more transactional who is on a clock that says, “I need to acquire a business in a defined time period.”

The other benefit for us is that businesses that are maybe on a growth path, but are still not of scale yet, where the owner is working to build out the management team, is growing 20% per year, but is still only 600K in EBITDA. That business just needs some time to mature. And if that owner is aware of what he needs to do before he sells, I want to foster that relationship so when the time does come, I’m first in line. And that’s a real benefit of having that Evermore holding company evergreen structure, that we can tend the garden a bit more. We can build relationships that’ll be a little more long lasting, get to know the players in the industry. Because a lot of these businesses will be transacting over the next decade. A lot of owners are going to be moving their businesses on, and we’d like to be the buyer of choice. But that comes not on a first initial cold email, but after a relationship has been built and you’ve talked to the owner multiple times over a two, three-year period.

Yeah, absolutely. I’d also be curious too, if your ability to have a long-term approach and then actively taking that approach with owners might actually allow you to acquire quicker. Because an owner will sense that you’re more of a long-term partner for them. You’re not as transactional as a searcher might be. I do wonder if you’d actually acquire still within that first 24 months, even if your intention or ability is to acquire it over an indefinite time period.

Ed Redden:

I think that’s a great point. And it’s said often that you’re not going to convince an owner to sell. But you can convince an owner to sell to you. So as long as that business is going to transact in the first 24 months, by taking this approach and by leveraging the benefits that we have with Evermore, hopefully we can stand out in their mind as a better fit for what they are looking for the future of their business.

I don’t necessarily have a question here, but I was thinking along the lines of where could you find unique ways both with content today, podcasts, blogs, that sort of more digital media type stuff to get ahold of owners. But at the same time, balancing it with some older world print, mailers, just phone calls. Just some interesting way of blending the two together to get ahold of owners in unique ways.

Ed Redden:

I think we are finding that with the increased use of email automation tools, with the availability of databases of people’s contact information, that owners are getting hit up more and more frequently by all types of business buyers. So you’re exactly right. It’s finding ways to stand out, to convey credibility, and to convey more of the ethos for what Evermore stands for. Who Justin and I are as individuals, what we envision success to be for the future of your business, and finding creative ways to get that in front of owners. You mentioned podcasts, you mentioned blogs, white papers. All kinds of different avenues like that are really going to be what differentiates best practices from really exceptional searchers in the future.

Justin Vogt:

Prior to the pandemic, we had discussed a lot of basically just doing road trips. Spend a lot of time the road getting to know people, shaking a lot of hands. Particularly in some industries where there’s a concentration of businesses in a certain geography. Go spend a couple of weeks in Los Angeles where there might be a lot of aerospace businesses. Go spend a week in the research triangle, getting to know a lot of laboratory related businesses. The services around them, the people involved in it. Unfortunately, the pandemic has put a bit of a stop on that process. But I would sure hope that once we have the ability to do a lot of traveling again, spending a lot of time on a plane and shaking a lot of hands because of this relationship orientation and having that high touchpoint with them.

And particularly with the fact that there are two of us and the ability for us to represent Evermore both individually and together, having that relationship building, buying a lot of lunches, buying a lot of steak dinners for people is absolutely part of the playbook. And I don’t think that it’s disingenuous. I would think it’s incredibly genuine to who we are in wanting to get to know people both over the phone, discussing kind of their financial model and different revenue streams. But also getting to know the individual over dinner, or a glass of wine, or what have you. And I hope that that’s a long-term component of what we do here.

You mentioned earlier about holding companies becoming a little bit more popular at Stanford, and how there might be a few coming out there. Why do you think they’re becoming more popular?

Justin Vogt:

I like to think that people are increasingly willing to be explicit about what they are trying to get out of this from the early stages. And as you hopefully see more examples, we are far from the first example. There are plenty of others that have blazed the trail ahead of us that we use this guidepost along our journey. And as you see those take shape and you see them align with what those individuals want, then you can sit back and say, “Well, here’s what I want. Here’s what I’m trying to build. Here’s my vision of success. Let me go out and try that, because other people have achieved it.” And having those examples out there is powerful. And we take a lot of learnings even from your podcast here, listening to the Chenmark episodes, and taking inspiration from what Brent Beshore is doing it Permanent Equity.

And those are kind of more on the financial side, but taking a lot of lessons from what the Rales brothers have done at Danaher, and doing a lot of reading about them, and how they’ve built that business. And seeing examples of people tailoring their financial structure, which at the end of the day is really just a legal document to try and align with their goals has been incredibly helpful. And I think people are increasingly gaining confidence in the fact that they can design it and raise money around their very specific set of goals.

Moving into some closing questions, what class in college would you teach if it could be about any subject you wanted?

Ed Redden:

The class I want to teach in colleges the importance of value stream mapping. So in my experience at GE, I got to see a lot of businesses. In searching, I get to see a lot of different businesses. I guess I’m less so now, but I used to be always surprised at how little people knew about their own business and their own business processes. You hire consultants, you hire people to come in and tell you where to remove the waste in your process, where to improve efficiency. When really, with a clipboard and a stopwatch, you could go around and map out your own business process, and ask the question, “Why are we doing it this way?” And man, you would find a lot of low-hanging fruit for improvement. So I’d love to take that class in college and say, “We’re going to go over to the endowment office. And we’re going to map that process from start to finish. And we’re going to go to different departments throughout the university, map a given process, and then find ways to improve it.”

I feel like the irony of that class is you might actually create more consultants as a result of teaching people how to be consultants in other businesses. But that’s funny. Justin, what would be your answer?

Justin Vogt:

I would love to teach a class around discerning priorities, and what makes you happy, and where you get value out of your life. So something that I’ve done a lot over the years is sit down at the end of the day, at the end of the week, and either write down or mentally take notes as to today was a really good day, and why? And try to discern that down into the most fundamental kind of things that happened in the day. Whether it be I was really happy today because I got to interact with people of this type. I really didn’t like today because I had to do these three tasks. And I think particularly in college, there’s a great opportunity for students to be very discerning about what they’re enjoying.

From my own college experience, I vividly remember being super excited about every Tuesday, because Tuesday night was investment club. And I loved going. I thought the speakers were fantastic. And I would write that down. And then I would go to my pre-law class on Thursday night and I dreaded it. And I was like, “What am I doing here if that’s the case?”

But it’s unbelievable how much writing it down and having to be specific about that process and that understanding, and writing down and saying, “This is what made today good. This is what made today bad.” How helpful that is in coming to those conclusions. And it’s a process I still do today trying to make further tweaks in my life and further tweaks in my job, and kind of where I spend my time. And I would like to think that college students would find that helpful, whether it be around career discernment, or geography, where they’re going to live, etc. I think it could benefit everybody, myself included.

What have been a few examples of things that happen during the day that make you happy?

Justin Vogt:

For me, it’s all about getting to know new people and having phone calls with individuals doing interesting things. So I love searching, because I get to hear these fascinating stories about small businesses around the country. And I love getting to know people that are working on really interesting projects, like building a great community around a podcast for small business owners. I get energy from hearing from those people and what they’re working on.

What I don’t get energy from is sitting behind my computer and working on an Excel file for six, 10, 12 hours, which was a big component of my prior job. And I knew I wanted to get away from that, and I knew I wanted to optimize for just frankly speaking with and talking to people doing really interesting things, which is really what the basis of search and hopefully my role at Evermore is for the foreseeable future.

Ed, I might turn that back to you. What things give you energy, and what things take away energy from you?

Ed Redden:

Things that give me energy are definitely all around people, and watching people succeed, mentoring, and kind of growing the team. Justin and I like to talk about who our mentors or people we would like to model ourselves after. And one of my greatest models for what I hope to become a business is Phil Jackson. The ability of him to take the talent that was Michael Jordan and the other players on the team and get the most out of them to help them achieve greater and greater goals, to achieve their highest potential as individuals. That’s what feels very rewarding for me. I’m a very curious person, so I like to learn about them and get involved and invested in them. And that is what I really enjoy most about my previous job and what I really look forward to getting to do at Evermore.

What I think is less energizing for me is a lot of the sitting behind a desk and just doing research, or manual tasks, similar to Justin. Building spreadsheets, or trying to do stuff where it’s just me and a computer, and you remove that human element or that interpersonal element from the equation. It’s a necessary thing that needs to happen to respond to emails, but I really do not enjoy writing emails.

What’s a belief you used to hold strongly that you changed your mind on?

Ed Redden:

I used to be an ops guy. So I used to be on the shop floor building and shipping product. And I used to just have this firm belief that operations people are the heart of the business. They are the ones come end of quarter, we’re the ones assembling the product, getting it out the door, managing the materials coming in, fulfilling orders. This is the heart of the business. And I used to look at the other departments, specifically the sales department and say, “Oh gosh, those guys in sales, they’re not doing the real work here.”

Now, I’ve kind of come a full 180. I still believe operations are the best. But I have a whole new respect for the front end engine that is the sales org. I have a ton of respect for the grind that is the sales process. And it has reaffirmed for me the value and the importance of recurring revenue as a stable, not having to go resell and put food on the table next quarter after quarter. I have a whole new respect for sales and just that sales process and what they go through.

Justin Vogt:

On a more personal, less business oriented note, my big shift, particularly since college and the time surrounding graduating and starting work. For me, the full 180 has come from I want to focus on work. That means there should only be one priority. I’m a career oriented person. And that means other aspects of my life should take a backseat. Namely, whether it be relationships around you.

And particularly for me, it’s most prevalent in romantic relationships. And as Alex knows, I’m engaged and have been engaged for about the last year and a half now. And we’ll get married someday after COVID. But the full 180 has come from I now know my most productive days are the days that I’m happiest, and get to spend more time with my partner. And she’s a big driver of extra energy for me. And now, I can’t imagine sitting here and saying I need to deprioritize other things in my life in order to be able to focus more on work and career. And that’s the exact opposite. The two are incredibly symbiotic. And I think it’s all possible to do that extra work and be that high achiever, that striver for the next thing, because of the relationships that are around me. I’ve totally come around on that. And I think it’s been an incredibly helpful portion of the last several years of my life now.

Yeah, I completely agree. I think I told you guys that I left my full-time job the day before my wedding. My last day at work was the day before getting married. So I started off marriage with no job, but a podcast. And I know also that that energy from my wife when I would spend time with her, that would push me through rougher days, and encourage you to keep going and keep pushing through. And the podcast wouldn’t exist without her. So I think spouses are often the unsung heroes of entrepreneurs doing cool things.

And I think it’s also impressive how many entrepreneurs have families and sometimes large families. David Neeleman is one of my business idols, and he has 10 kids. So if he can start five or six airlines, however many he’s done successfully, there has to be some correlation there. So anyhow, that’s just a bit of a ramble around family. But I definitely think it’s a huge ingredient in being a successful entrepreneur.

Ed Redden:

I couldn’t agree more Alex. Evermore would not be here, I would not be here without my wife. And managing the priorities of our now nine month old son is just total support from your spouses is invaluable and very grateful for the support and wife that I have.

Absolutely. What’s the best business you’ve ever seen?

Ed Redden:

The best business that I’ve ever seen is in this kind of preventative maintenance and repair industry. It’s a business in Southern Indiana that does regularly scheduled preventative maintenance on industrial assets. Pumps and motors, fans, other equipment. Comes out and does the regular preventative maintenance on that. But then also because of that relationship, because they know the equipment when the thing breaks, which is inevitable, they also get kind of the high margin repairs there. And what’s really interesting about this business is they also leverage some remote condition monitoring in between the regularly scheduled preventative maintenance checkups. They’re watching the assets and kind of monitoring them remotely from afar. And that scales so nicely such you’re managing the failures by exception. Owners can look at it as an insurance policy on the asset somewhat that somebody is keeping their eye on it, and takes the onus of monitoring another dashboard. And is this sensor working? It takes that off the plate of the owner, and enables the business to be able to capture some of that value by saying, “Hey, I’ll take care of all of that for you.” And it provides a very nice recurring revenue stream as well.

That’s interesting. So with those sensors to monitor equipment, are those already installed in the equipment by default? Or is that something the company has to add to your product or your machine shop in order to monitor them successfully?

Ed Redden:

That is something that is typically added in addition. So OEMs of motors and pumps are not good at being conditioned monitoring tech platform type people where you can look at the dashboard. That’s just not the business that they’re in. So there are a lot of IIoT, industrial internet of technology, smart sensors out there that can be easily deployed across a variety of assets. From temperature monitoring, to vibration monitoring. Really lower cost sensors that can be deployed onto these assets. And as the service provider, being able to see into the equipment and take what used to be kind of a break fix industry. “My motor broke, let me call the five repairmen that are in my region. Who can get here fastest? Because my production is down.” That has now been turned on its head where the service provider is now calling the manufacturer saying, “Hey, I noticed something is wrong.” Or, “Hey, I noticed your pump went down last night. I’ve got a tech who can be there within an hour.” And that is a huge win for the plant manager who wants to and is worried about shipping product, fulfilling customer orders, growing his business. What he doesn’t want is another dashboard, and another sensor, and another thing to monitor and upkeep. So it’s a really win-win for both parties.

That’s interesting. It seems like you could apply that also to any part that wears down over time. And you could monitor that. And once it gets to a certain wear, or dullness, or what have you, it ships you a new part automatically. I think one comparison personally that I’ve used is bottomless for coffee. And you have your bag of coffee beans on a digital scale that connects to your wifi. And when it gets to a certain weight, it automatically mails a new bag. And you can choose whether you want it to arrive a few days before you’ll typically run out, or you want it to arrive just in time so it’s the most fresh beans that you’re using. But it’s this really interesting business where it’s coffee now, but you could see how that applies virtually anywhere. And what’s also cool about it is you’re ordering from an online catalog of coffee that is often not available in your local grocery store.

So if your grocery store doesn’t have good coffee, suddenly you have access to hundreds of different coffee bags from Oregon, or Montana, California. Anywhere you can imagine coffee being from, you could order a bag from that and subscribe to it on this basis where it just shows up. And we’ll open the door and there’s a package from bottomless. “I guess it was time for coffee. It’s never been on our shopping list.” So that’s something that’s kind of cool, but that’s kind of what I thought about listening to your business there.

Ed Redden:

Absolutely. And any piece of rotating equipment typically has exactly that lifespan. Like bearings and gears, they’re going to break down. They’re going to need repair. And you can track that by a time-based preventative maintenance plan. I’m going to do it once a month, once a quarter, or whatnot. But sometimes, the asset has a heavy month and gets used very frequently. So it gets a lot more wear and tear where that would need to get moved up. But you’re not going to know that unless you’re continuously monitoring it or you have that vibration sensor on there saying, “Hey, something’s wrong here. Your lubrication is off. You’ve chipped a tooth on that gear. Something’s not right.”

So you’re exactly right. That just adds to more business, more high margin repair business, and eliminates your competition from being able to come in. And no one else is going to come in and give you a coffee subscription, because it’s taken care of.

Exactly. Justin, what’s your best business?

Justin Vogt:

I will stick in the search fund world and say PEC safety, which is a search acquired deal from a searcher out of Stanford probably five or seven years ago now. It has since been acquired by Thoma Bravo. And they’ve done a couple of large add-ons. It’s a super successful business. But at its core, what it is is it’s really a safety business for oil and gas workers. And they come at this in a couple of ways.

One is they train the trainers for a variety of different safety tasks. So these trainers keep their certifications up to date annually. They come back to PEC every year. Some of them still on paper textbooks, some on digital now. But they need to have this service. They need to be able to continue to train the workers out in the field. And then because they know who all of these workers are, they’re a part of the ecosystem for training, they also provide certification for contractors that are going on to different job sites.

And what’s particularly interesting here is PEC will work with the owner of the site where the oil is being drilled or oil is being moved. They will say, “Don’t you want all of your contractors to show up to be certified, that they’ve done the training, that they have the right insurance, etc.? And we’re not going to charge you anything for that, but we’re going to charge the contractors.” So the owner of the site says, “Absolutely, I want to make sure that everybody’s safe. I don’t want an accident to happen here. Go ensure that that happens.” And we’ll require it for any contractor that shows up on site. So PEC will go to those contractors and say, “XYZ big oil company now requires you to have our stamp of approval. It’s X dollars for your contractor size.”

And because it’s a one-off business expense for the business, they don’t really care what it costs. They want to be able to do their work on-site. And PECs got this incredible competency to be able to verify the insurance, verify the training, etc. And they just have this absolute flywheel of businesses coming in. And once they’re there, they have this standing relationship. Everybody knows everybody such that they get their stamp every year. And the business is becoming more digitally native now, which is just making the flywheel turn faster. And I say this all because I spent my summer there as an MBA student in Mandeville, Louisiana, working with the team. And it’s just the most phenomenal growth engine business I’ve ever been a part of. And it’s in safety training and certification for oil and gas businesses. It was fascinating.

Both of your businesses are ones that need to get done, but aren’t necessarily given much thought to. So the monitoring of equipment. You’re not going to go to a different monitoring equipment company to use their service instead. Or if a site requires your PEC certification to do your work, there’s not really a company that could disrupt that relationship. It’s interesting that you guys both had similar models in that regard.

Justin Vogt:

It’s like we spend all day every day talking to each other about what makes a great business.

It certainly seems that way.

Ed Redden:

What’s really fascinating too Alex is that you can take it even a step further. And both of these businesses, any business that’s collecting data has this unbelievable potential to them, especially on the asset side to go, “Hey, I’ve been out three times in the past six months to repair the same gear or the same whatever on the same asset. Why don’t we take a deep dive in here and figure out what’s going on with this thing so we can reduce the number of failures from three, down to two, down to one?” Maybe it’s not just normal wear and tear. Maybe your operator’s aggressively grinding the piece with that CMC machine, or something might be abnormal that we can look into. But you can only do that if you have the data, and can look at long time horizons, and recognize patterns. Same thing with PEC, I’m sure. They have data on employees, and companies, and projects. And they can monetize that data to improve their own business.

That monitoring element reminded me of a conversation I had with an owner recently, who was talking about GPS tracking on their trucks for this lawn care business. And not only would it track just location, but it could track speed. Or if the truck has idled in one place for more than a few minutes, he’ll actually get a text alert that this truck isn’t moving and is using gas. And then it sends him an alert as well. Not him the owner, but one of his managers. He gets an alert that the truck is now going 71 in a 55. And that manager can go talk to the employee and say, “Hey, slow down a little bit.” But that monitoring data building business is just so fascinating to me. That’s super interesting.

I’ll let you guys go here, but thank you so much for sharing your time with us today. It’s really fun to hear about Evermore Industries. And I of course always love chatting with you guys, so this is super fun in that regard too.

Ed Redden:

We really appreciate it, Alex. Thanks a lot for having us on the podcast.

Justin Vogt:

As always Alex, this was fantastic. And I look forward to seeing what you do next and growing the podcast, the investing arm. I’m thrilled.

Excellent. Thanks guys.