My guest on this episode is Greg Geronemus, co-founder and managing partner of Footbridge Partners, a traditional search investment firm. This is my second episode with Greg, the first being episode 17 back in April 2020, where Greg shared his experience acquiring and operating his search company SmarTours and launching Footbridge.
Well, two years later, Greg and his partner David have raised that fund and are halfway through their investment period with a budding portfolio of searchers. In this second episode, Greg shares his view on the role of a search investor, misconceptions in traditional search, the risk in buying at larger multiples, and a few wild stories from his time running SmarTours. Enjoy.
Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.
Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
(4:45) – Greg’s Background and career
(6:43) – How much did the experience of running smart tours help in your advisement to searchers?
(8:40) – Is there a specific experience from your time with Smart Tours that you reference often with searchers?
(10:21) – Greg’s experience cancelling a season of Ukrainian river cruises
(11:11) – Have you invested in any companies that have the same exposure as Smart Tours?
(12:19) – Are there any themes you’ve noticed in the investments you pursue?
(14:10) – What is your perspective on the role of a search investor?
(18:10) – Can a hands-on investor approach be scaled across 60-70 searchers?
(19:53) – Common misconceptions about the world of search
(25:35) – What risks do you see in searchers buying larger and larger businesses?
(29:30) – What are some interesting changes you’re seeing on the self-funded searcher side?
(33:23) – How can a self-funded searcher or search investor protect themselves during the process?
(37:33) – As an investor, What sorts of numbers, metrics and reports are you looking for from searchers either quarterly or annually?
(40:13) – How frequently do you communicate with searchers?
(42:16) – What’s the best business you’ve ever seen?
Alex Bridgeman: It’s been since April 2020 that you were on the podcast. So right as COVID was starting, and I was at episode 17, so I hadn’t even gone on the weekly podcast yet. I was still on monthly, doing all the audio editing myself. I remember editing your episode and trying to figure out how Audacity works and all that sort of stuff. So, a lot’s changed since then. At that point, you think you were about to launch Footbridge or in the process of doing that. And today you’ve invested in quite a few searchers and, I’m sure, have learned a ton along the way. For those who didn’t hear episode 17, which we’ll reference, but for those that didn’t hear that episode, what’s kind of the quick 60 seconds of your background and how you got to Footbridge.
Greg Geronemus: Sure, and thanks for having me again. It’s fun to be back, and I can’t believe it’s been almost two years. So, by way of background, I grew up in New York City, helped with my family business growing up, which was in the healthcare services space, but wanted to give finance a try. After college, I worked at Goldman Sachs for a couple of years in one of their private equity arms. But I pretty quickly knew that I wanted to do something entrepreneurial. So, that brought me to business school, I figured I’d forge my entrepreneurial path over the two years where I had some extra time on my hands and learned to search, fell in love with the concept, connected with my friend and still business partner 10 years later, David Rosner. We decided to go out and do a quasi-traditional search and ended up buying a business in the travel space, a company called SmarTours that we bought well and scaled up and eventually sold four years after we bought it. And as we were transitioning out of SmarTours, we started investing personally in search and fell in love with that. The process of mentoring and coaching and working really collaboratively with searchers was just a blast. And that inspired us to start Footbridge Partners or the second iteration of Footbridge Partners where we work closely with a small subset of traditional search fund entrepreneurs. And we’ve acquired five companies over the last two years, I’ve worked with six searchers and continue to add to our crop of searchers and look for great companies to acquire.
Alex Bridgeman: Yeah, that’s awesome. One question, I’d love to ask you more about some of the investments that you’ve made. But one question I had prior to that was: You obviously have run a business before for four years, SmarTours; I’d love to know how much did that experience help in your advisement of other searchers? Because most companies- like every company is very, very different and unique, but there’s enough commonality between them that I’m sure it was useful. I’d love to hear how much commonality was there between your experience at SmarTours and how helpful you could be with searchers in other businesses. Perhaps there were certain areas of the business you could be most helpful and some where it was very unique to the business and your experience didn’t apply nearly as well. I’d love to hear a little bit more about how your experience at SmarTours has helped and connected with other searchers.
Greg Geronemus: Absolutely. I think it’s been critical. I don’t think I would be very good at my job today at all if I had not had the operating experience, whether it’s discussing an issue around hiring or firing, or if it’s about how do you launch a new business line, how do you deal with the stress of needing to shut down due to the pandemic. Thankfully, we didn’t have to deal with that during our operating days, but you become accustomed when you’re operating to just curve ball after curve ball and then getting brushed back with a hundred mile per hour fast ball, and being able to share the experiences that we had, the perspective that we developed was absolutely critical. And I would say 90% of the issues that small businesses face are pretty similar across industries. Now there’s a lot in that 10% that can be quite different, but there’s so many commonalities that I think it’s been incredibly helpful for my job now more as mentor and coach and board member for these companies.
Alex Bridgeman: Is there a particular experience or event at SmarTours that you’ve referenced the most in helping searchers?
Greg Geronemus: I think, and again, we didn’t have to navigate the coronavirus pandemic, but we did deal with Ebola and Zika and terrorism events. And so, SmarTours, just to take a step back, we send people, typically older Americans, to exotic destinations all around the world. We’re pretty diversified across the globe, which was a great thing from a business standpoint, but it basically ensured that anything that you’d read about on the front page of the newspaper that was going on overseas was at least a baseline headache for us. So, I got accustomed to getting a phone call in the middle of the night saying we’ve got to get people out of this country, this is happening, or all our trips to Ukraine are being canceled because Russia’s starting a war – this was back in 2014, it looks like it might happen again. And so, I think just being able to share the perspective of this is not going to be a straight line, there are going to be lots of bumps in the road, and try to control what you can control, don’t try to fix some event, some macro event or some geopolitical event that’s far beyond your control. I think sharing that perspective, I believe, has been particularly helpful in connecting and guiding the searchers that we’ve been working with.
Alex Bridgeman: Is there a particular event within all of those chaotic events that you remember the most that was burned in your mind of trying to get someone out of a dangerous area?
Greg Geronemus: I think thankfully there wasn’t anything particularly dramatic. There was nobody within a few miles of an absolutely awful event. But probably the first one of just having to cancel an entire season of Ukraine river cruises. Believe it or not, we had a pretty big Ukraine river cruise program that was a decent revenue generator back in the day. That was the first blow eight months after we bought the company, having to refund a nice chunk of change and just see all that revenue go out the door. That was the first of several. But yeah, not a fun experience.
Alex Bridgeman: Yeah, definitely not fun. So, within your Footbridge investments, have you invested in any companies that have that same exposure, or are you trying to steer clear of companies that have international chaotic event risks?
Greg Geronemus: Well, thankfully, we haven’t invested in anything- or we didn’t invest in anything pre pandemic in international travel. We do own a business that serves the tour operator market. So along with Betsy Brandt, actually now Betsy Harbison, with Forest Park Capital, we bought a company called Softtrip, which was formerly a subsidiary of SmarTours’ largest competitor, a company called Gate One Travel. They had built their own basically ERP software system to originally power their own business and then subsequently started selling it to other tour operators. And we bought that business from them. So, they serve companies that in turn send people overseas. We have some indirect exposure, but nothing as directly related to international travel as we were once in.
Alex Bridgeman: Are there any themes that you’ve noticed or developed or pursued within some of the investments you’ve made? Or have you, for the most part, let the searchers just find whatever companies they find most interesting and that you agree are a good business to acquire?
Greg Geronemus: I’d say it’s been a mix. We certainly try to give the searchers that we work with a lot of latitude, and I think we do. We’re working with them at every step of the way very closely, try to be as helpful as we can. That’s a big part of our thesis at the Footbridge level is to work with a smaller number of searchers and be really engaged, really the best partners that a searcher could ever ask for. So, there’s definitely a lot of latitude. At the same time, if you look at our five investments that we’ve made, operating company investments that we made, one of them is in the med spa space, and my family business growing up, I said health care services, but in particular, it was a cosmetic dermatology business, so quite related. Another business is called The Change Companies in the behavioral health substance use disorder treatment category, and my wife is an addiction psychiatrist, and I’m inundated in her world. And I already referenced Softrip, which is a carve-out of one of our old competitors from the SmarTours days. So, three out of the five businesses that we’ve bought have been pretty related to either our search company that we bought, operated, and sold, or very close sort of family for me. So, I don’t think that’s an accident, and I think it speaks to how closely we work with the searchers and are sharing ideas and sharing what we find interesting.
Alex Bridgeman: Yeah, I was going to ask you a question later about the different roles of investors over time, but I think it might actually fit better here. I’d love to know what your perspective is on the role of a search investor and how that’s changed over time and perhaps what you think that might evolve into over the next few years.
Greg Geronemus: In the early days, there was only one variation of search; it was traditional search. There were a small number of investors and an even smaller number of searchers every year. So almost by definition, every search investor had small portfolios. Even if they backed every searcher that came out and raised the search or bought a company, they would only have a couple searchers at a time and a few businesses, three, four, five, six businesses at a time. So, they could be- each search investor could be really involved, hands-on, helpful. And I’ve heard stories from some of the first ten, fifteen searchers about just how closely they worked with their investors and how valuable that was to them. As search has grown, the number of investors has certainly increased, but as we all know, the number of searchers has shot up like a rocket. And now you see a lot of search investors with really sizeable portfolios. It’s not uncommon for a search investor, whether it be a fund or a family office or individual, to have 40, 50, 60 searchers and 40, 50, 60, 70 portfolio companies. And as a result, there’s no question, I see it all the time, the degree of collaboration, partnership, mentorship has declined significantly on average. And so, you have a lot of search investors that really don’t have bandwidth, even respond to email questions, return phone calls, let alone sort of dig into due diligence, forget about having capacity to serve on a board post-close. And I think a lot of searchers have suffered as a result of not being able to get the same degree of support and guidance that searchers in the early days did. And that really was a big inspiration for starting this second iteration of Footbridge Partners. David and I wanted in our own way to do our part in being really collaborative, really engaged, really helpful partners. And that’s how we interpret the role of search investor. It’s being available by text or Slack or phone or FaceTime or Zoom as readily and easily as possible, going onsite meeting with the sellers, helping negotiate the deal from LOI stage all the way through the purchase agreement, really engaging on due diligence to make sure that the searcher doesn’t find themselves in a difficult spot post-close, and being that sort of indispensable, accessible board member after the deal closes. And that’s our approach. I think it’s more old school. But I do think as we look ahead, I’m hearing more and more from searchers that they want that type of value-added, engaged investor. And I do think we’re going to see the pendulum swing back to closer engagement, and I think that’ll be a great thing for the entire search ecosystem, great for searchers, I think would be better for deal returns. And I think it will end up in the right place over time. It may take a couple of years to get there, but I think we’ll get there.
Alex Bridgeman: Do you think that hands-on role from investors is something that could be scaled across a portfolio that you mentioned earlier between 40 and 70 searchers perhaps by either just hiring more associates at the firm level to help the searchers on an ongoing basis? Do you think that scales at all? Or do you think that’s something that has to stay, almost by definition, has to stay small, like a boutique investment firm perhaps?
Greg Geronemus: I don’t think it scales. I’m sure other firms would disagree with me, but I don’t think it scales. And your idea about hiring junior folks to assist with searchers and CEOs is a logical one, and that’s done today. The issue, and I hear this from searchers all the time, is that you can throw a body at them, but if that person hasn’t run a business or been through the search journey themselves or doesn’t have the requisite experience to give sound, seasoned advice and guidance, I don’t know how valuable that extra body is. And I don’t want to be disrespectful to associates at search investment firms, but I just don’t think it’s the same. So, I don’t really think it scales, and some things just don’t scale and that’s okay. I think you can have a very fruitful investment strategy, search investment firm without an army of associates to send it out into the world.
Alex Bridgeman: Yeah, certainly. And there’s a number of misconceptions within traditional search that we’ve discussed either through calls or email. I’d love to hear a little bit about those and just break some of those down that you’ve come up with or thought about over time.
Greg Geronemus: One of the big ones that I hear today is that traditional search has become too competitive. Some people will point to the number of searchers out there and say the space is just too crowded. I personally think that couldn’t be more off the mark. If you look at the number of searchers, yes, there are way more searchers, way more traditional searchers than there ever have been, but it’s a drop in the bucket when you compare it to the number of small businesses out there that maybe targets for acquisition. Others will say, well, what about independent sponsors and lower middle market private equity or even larger private equity firms doing ad-ons for smaller businesses? We continue to see great opportunities to buy really attractive businesses at really attractive multiples across our portfolio, our average entry multiple, despite buying businesses with $3, 4, 5, 6 million of EBITDA, it is just below five times. I think a lot of people would be surprised to hear that, and I think that would sort of go against some of the misconceptions out there about traditional search. There are still sellers who really value the idea of having a successor talented entrepreneur come in and take the reins and take care of their team and their baby. And there are a lot of sellers out there that frankly just have a number in mind, they want $10 million for their business, they want $20 million for their business, and often that translates into a crazy multiple, but it also sometimes translates into a pretty reasonable multiple. Other misconceptions that I hear about – this idea that as compared to other forms of entrepreneurship through acquisition, in traditional search, you’re not really an owner, you’re more an employee with an option pool. You’re not really an owner because you can own only up to 25 or 30% of the business. But I think if you actually polled searchers that go down the traditional search path, ask them if they feel like an owner, if they feel like it’s their baby, I think it takes probably two weeks post-close and searchers feel like it’s their show. And it really is. A good board is there to be endlessly available and helpful, but searchers have so much autonomy, authority, 99% of the decisions are made by them because they need to be made quickly and by the person on the ground. And really this idea that they’re not true owners, I just don’t think really fits with reality. In terms of other misconceptions, these are somewhat critical of the traditional search model, but I think there is this misconception that if you raise search capital, that you’re, by definition, a more credible buyer in the eyes of a seller or an intermediary because you already have some backing and people that have come or put money behind you. But I think the reality is a lot of sellers, a lot of intermediaries are pretty darn skeptical of any type of search or traditional self-funded, you name it. And I don’t think it buys you a ton of credibility. It really doesn’t hurt, and if you’re able to use your investors well and bring them into the fold, you can help yourself. But just to think that because you put some investors on your website and throw some logos of search investor firms on your website, it’s not going to do a whole lot to help your credibility in the eyes of a seller or intermediary. And last but not least, I would say that I think there’s an assumption by some that if you raise search capital, if you get people to write search capital checks to fund your search, that you’re guaranteed to get a lot of coaching and mentoring and support. And that’s certainly not the case. You absolutely can get that if you’re intentional about the investors that you choose and if you’re proactive about seeking out their support. But I think of it similar to when you’re in college – if you don’t go to office hours for your professors or you don’t proactively reach out to them, you probably won’t develop much of a relationship with them. So, it’s really, I think it’s up to the searcher again to be intentional about who they select as investors, if they’re in the position to select their investors, and then kind of make the most out of that. But it’s not guaranteed that just because you have people writing you a check for search capital that you’re going to get their mindshare.
Alex Bridgeman: Yeah, of course. And you mentioned earlier one of your misconceptions being that the searchers, traditional searchers don’t feel as much of an owner because they’re a smaller percentage of ownership than maybe a self-funded searcher might be, but of course, you’re buying a larger business, so your equity is probably more comparable than just looking at percentages. But one point that we talked about in that sense is traditional searchers you’ve seen a lot are buying larger and larger businesses where the model starts to at least show some kinks in the armor. I’d love to hear a little bit about some of the risks that you see in searchers buying continually larger and larger businesses. Like at what point do problems start to show up from what you’ve seen?
Greg Geronemus: Sure. And I think I’ll clarify a bit where I think the issues are. I think part of it is related to size, but I actually think more of it is a function of- or more of the challenges related to searchers paying really high entry multiples, I mean, you’ll see searchers, some searchers these days beat out lower middle market private equity firms on deals, some paying well north of 10 times EBITDA for larger businesses but still small businesses in the grand scheme of things, or paying really aggressive multiples of ARR for software businesses. And my concern about those lofty entry multiples is really twofold. First off, I think search deals have an added layer of risk, and that is the transition from a more seasoned, experienced owner-operator to a less seasoned, less experienced, often much younger owner-operator who in most cases doesn’t know much about the industry that they’re entering. And I think a lot of searchers and a lot of search investors will often underestimate that risk, underestimate how important the prior owner was to the business that, in many cases, they founded and really built from the ground up, and also underestimate how much of a learning curve there is for a searcher. So, if you think about the scenario where a searcher beats out a lower middle market private equity firm, pays 12 times EBITDA for a business, you need to grow that business fast in order to justify that entry multiple. And oftentimes the first year, 18 months, two years, the searcher is just finding their way. They’ll make some mistakes, they’ll lose some customers. They’re not able to get in the rhythm of really growing and scaling the business. So, you’ve got big entry multiple, you’ve got this big learning curve, and that can be a tough combination, especially when the cost of capital is high. Search investors are looking for returns in the mid to high twenties and in many cases in the thirties from a net IRR perspective. And if you pay a big entry multiple, you have a big learning curve, and you have this high cost of capital with a high expected or required return, it can be a tough mix of circumstances for a searcher, particularly a first-time owner-operator. Not to mention that you don’t have the same degree of downside protection that you do when you buy a business for a much more modest entry multiple.
Alex Bridgeman: So, we talked about different changes within traditional searchers. What are some interesting changes on the self-funded side that you’ve started to notice, maybe new model innovations or different things that self-funded searchers are trying? What are some interesting things you’ve come across?
Greg Geronemus: Well, I’ve seen the terms on self-funded deals become, in my opinion, more and more out of whack. And I say that with a lot of respect for folks involved in the self-funded search world. And I also say that and I encourage self-funded searchers to get the best possible terms that they can, but there are a lot of deals where you’ll see investors having only 15 to 20% of the upside of the common equity on a transaction. That’s more than the inverse of what you see in traditional search. And my sense is that there are a lot of newer search investors out there that maybe they learn of search on Think Like an Owner and they find their way to searchfunder.com. They see some self-funded deals. They see an attractive entry multiple, oh, can’t believe it, you can buy this business for three and a half, four times EBITDA, but they don’t quite realize that they’re not investing in an asset class that’s remotely similar to traditional search. They might be excited by the returns that they saw in the Stanford study with all the data points. But what they’re getting is a vastly different security. Maybe they’re getting an 8% or they’re getting a 10% preferred return and they’re getting 10, 15, 20% of the upside. That’s dramatically different. That’s closer to debt with warrants than it is really owning and having a significant amount of the upside, more of like an equity investment that you’ll see with traditional search. And so, I have concerns about those deals. I’m very pro searcher. I want searchers to get the best deals that they possibly can, but I think it’s- every searcher also wants to put their investors, I think, put their investors in the best possible position to get great returns, too. And I think the terms have become so skewed that I worry that there are going to be a lot of unsatisfied investors who didn’t quite appreciate some of the nuances of the deals that they were entering into. And on top of that, you also have in a lot of these search deals, these self-funded search deals, you have searchers that don’t have a lot by way of accountability. So, a lot of them don’t have boards of directors. They’re very light in terms of reporting requirements. I think sometimes governance can be a nuisance to an operator, but I do think more often than not, it can be helpful and especially for a first-time owner-operator. So, I’m concerned about what the next few years will look like in terms of self-funded search. I’m concerned that there will be a number of deals that go sort of wrong or sideways, investors that get burned. Hopefully things will sort of settle in a reasonable spot, but I’m not particularly optimistic about a lot of the deals that are getting done these days, not to be too much of a pessimist.
Alex Bridgeman: Well, what are some ways that a self-funded searcher or first-time self-funded search investor could protect themselves or get a sense for what’s market? So that I know kind of roughly what I’m doing, at least I have a better- I’m a little bit more informed about the decision I’m about to make. What are some ways that you could get more informed or protect yourself better?
Greg Geronemus: Yeah, I think start with the governance and accountability piece. I think it’s perfectly reasonable for the self-funded deals, even if the economic structure is different, for there to be solid governance in place. Make sure that there’s a board of directors, make sure that the searcher has to deliver a budget each year that’s reviewed and approved, that there’s oversight over their comp, so annual cash comp, so that is handled in an appropriate way that’s fair for everybody involved. I hope that search investors, newer search investors, looking at these self-funded deals ask to see the model, ask to see the Excel backup behind the return projections that are being displayed and the materials. So, they can see, okay, well yes, they’re buying this company at an attractive entry multiple, but because of this economic structure that’s being proposed, you need to grow this business at a remarkable clip, at a tremendous growth rate in order to generate the type of return that I would find attractive. I’m really making sure they understand sort of all the components and all of the assumptions that are underlying the return projections that are being displayed in the materials.
Alex Bridgeman: What could a searcher do?
Greg Geronemus: I would argue that most searchers are on the earlier end of their career, some are not, but let’s just, we’ll go with the example of a searcher in their late twenties, early thirties. Searchers should take a step back and think about balancing both their economic opportunity, the terms that they can get with wanting to put up an awesome outcome, a great return for their investors. And I think in most deals, there’s a happy medium. There’s a happy middle ground between those two objectives. And even if you can get terms where as a searcher where you keep 85% of the common equity, what does that mean? What does that imply for your investors? Are you setting them up for success? Or would it be better to have a different split in order to balance your own economic opportunity and the reasonable return expectations for your investors? So, I would encourage searchers to give that a little bit more thought and try to solve for that happy medium.
Alex Bridgeman: Yeah, I would imagine there’s kind of that embedded incentive to get the best possible deal you can, but there’s also the risk that you run into problems or concerns and conflict perhaps with your investors later down the road if those issues weren’t worked out at the start, perhaps.
Greg Geronemus: Yeah, absolutely. And I would also encourage self-funded searchers to go out of their way to bring on a board of directors, to put in good practices, best practices around governance, and to invite accountability because it can be a lot more helpful than it can be harmful or a nuisance.
Alex Bridgeman: Yeah. You mentioned a few different items that come out in board meetings over the course of a year, a budget being one of them and then quarterly reporting on some degree. As an investor, what sorts of numbers, metrics are you looking for and what kinds of reporting are you looking for a searcher to send your way either quarterly or annually?
Greg Geronemus: So, in all deals that we do as Footbridge, we’re on the board of directors. That’s just our model of being more hands-on and engaged. And so, I’ll speak as a board member, and what we’re looking for is as much as it’s important to see financial performance, it’s even more important to see really KPIs, really understanding what metrics the operators are tracking so we can have a better sense for where the wind is blowing and how we can be helpful. Oftentimes what happened over the last 12 months is not going to be indicative of what’s going to happen over the next 12 months. So certainly, financial performance, but also understanding what KPIs they’re tracking and keeping an eye on those just with the goal of being helpful. But also, big strategy questions, and there’s an issue with an important customer, there’s an issue with a key employee, there’s some concern or question around business model, or there’s an identity, or who do we want to be? What do we want to be three or four years from now? Those are all great questions and pieces of information that we want and we invite. So yes, there’s sort of a formal- There’s formal reporting, there’s financials, there’s operating metrics, but there’s also a good board searcher relationship involved in ongoing dialogue on any number of issues. And I think for a board member that’s not a- or sorry, for an investor that’s not a board member, I think the baseline expectation is financials and sort of a quarterly written update so that you can stay sort of apprised of some of the bigger developments. But I don’t think it’s necessarily reasonable to expect much more than that.
Alex Bridgeman: Yeah. And Footbridge is kind of a unique model where you focus on a couple searchers versus having a larger portfolio, so perhaps your numbers are a little skewed, but I’d be curious how much time or how frequently you communicate with each of your searchers. Are you trying to do something that’s close to weekly or monthly, or is it more just impromptu as needed? Are there certain baseline communication frequencies you’re trying to set up with your searchers?
Greg Geronemus: So, yeah, there’s no one cadence. I’d say on average, we probably have a formal standing call, whether it be during the search or operating phase, every other week, but that’s just- that represents a small percentage of the overall interaction that we have with searchers. We have very robust back and forths on Slack, we’re on the phone a lot, we’re texting quite a bit. I’m not sure what inspires somebody to send a text versus Slack, but that’s another conversation. But I looked at I think it was Q3 2021, we had over 5,500 Slack messages exchanged with searchers. So, it’s ongoing, and there’s a lot more asynchronous conversation and communication than there is formal standing calls, but we have a good amount of both.
Alex Bridgeman: So, it is your Slack channel your entire group of searchers all communicating together in one channel, or do you have different channels for different industries or sets of your portfolio?
Greg Geronemus: Yeah, different channels. So, I think most of the activity actually happens just searcher to me and David, but there are some messages that are posted to the broader group. But it’s been an evolution for us. David and I are not as tech savvy as some of the younger searchers that we work with. But we’re getting better at Slack I should say.
Alex Bridgeman: Well, I asked you in the first episode for the three closing questions, and your two of the three will stand, but I wanted to get a new answer for what’s the best business you’ve ever seen. I believe a new one popped up in your mind. I’d love to hear a little bit about that one.
Greg Geronemus: Yeah, absolutely. I’ve got to give some love to The Skin Center, which is the med spa business that we own. And it’s led by Greg Sanker. And I’ll also give credit to the founding brothers, Nic Brandy and Jerry Brandy, for getting the business started over 40 years ago. But this whole med spa category and the Skin Center in particular, I’ve just absolutely fallen in love with. You’ve got a tremendous amount of repeat, almost like recurring revenue of people- I don’t know if you’re a Botox user. I probably will be at some point in the next couple of years; my wife tells me that I should get on the Botox train. But if you do Botox or filler, it’s not just something you do once, it’s something- Botox is a quarterly pursuit and filler is every nine or twelve months. The unit economics are just phenomenal, and the trends are incredible. The sort of secular industry trends are just incredible. It’s hard to find a category that has the same growth clip and really enduring growth that you’ve seen with aesthetics and cosmetics. It’s been growing for a very long time, and it does not appear to be letting up. In fact, it seems to be accelerating. So, just thrilled with how that business is performing. And the team there is awesome. It’s really dominated the Pittsburgh market and has a presence in Ohio, and you’ll be seeing more of it around the country as time progresses.
Alex Bridgeman: That’s fantastic. Well, thank you so much for coming on the podcast again. It’s always good to hear from you and hear updates on Footbridge and the different companies you are investing in and all this stuff. So, thank you so much for sharing. This has been really fun.
Greg Geronemus: Thank you, Alex. I had a great time. Appreciate it.
My guest on this episode is Greg Geronemus, co-founder and managing partner of Footbridge Partners, a traditional search investment firm.