Conversation with Irv Grousbeck

TL;DR

Irv, co-founder of Continental, shares his experience starting a search fund and the importance of refining criteria when searching for a company to invest in.

Transcript

[MUSIC] Irv, do you mind starting by talking a little bit about the early years at Continental, and specifically how similar or different they were to a search fund situation? >> Well, okay, here's the straight story. I'm going to spend a little bit of time on ancient history, but there's more interesting topics to talk about today and tomorrow. Bu... Read More

Key Insights

• 👨‍🔬 Irv emphasizes the importance of refining search criteria when starting a search fund.
• 👍 The cable television industry proved to be a successful choice for Irv and his partner, despite their initial mistakes.
• 👨‍🔬 Search funds have become increasingly popular in recent years, with the emergence of trends such as institutional capital and recap transactions.

Questions & Answers

Q: How did Irv and his partner refine their search criteria for a business to invest in?

Initially, they looked at various small businesses but eventually decided to focus on service-based companies with recurring revenue and a franchise-like business model.

Q: How did Irv and his partner stumble upon the cable television business?

They came across the cable television industry after realizing that the nursing home business was not a good fit for them. The cable television industry turned out to be a successful choice for them.

Q: What are some trends Irv has observed in the search fund industry?

Institutional capital is becoming more common, secondary shares transactions are increasing, and longer holding periods are emerging. This indicates a maturing industry.

Q: Where does Irv think the search fund industry is headed in the next five to ten years?

Irv predicts that the influx of capital into search funds will continue and potentially accelerate. However, he believes that the average quality of talent may diminish, leading to higher failure rates.

Summary & Key Takeaways

• Irv and his partner started a search fund with criteria of finding a profitable, service-based, and franchise-like business. They initially looked at various small businesses before narrowing down their criteria.

• They stumbled upon the nursing home industry but realized it was not a fun or engaging business. They then came across the cable television industry, which proved to be successful despite their initial mistakes.

• Search funds have gained popularity in recent years, with trends such as institutional capital, longer holding periods, and recap transactions emerging.