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Nick Haschka – Reversing Course on a Holding Company

My guest on this episode is Nick Haschka, back for a third episode to provide an update on his early ambitions of a holding company, which have taken a slight turn.

Episode Description

My guest on this episode is Nick Haschka, back for a third episode to provide an update on his early ambitions of a holding company, which have taken a slight turn. Two years ago, Nick and his partner Anupam Sharma acquired a commercial landscaping company Vargas Gardening. They added a manager and grew the business, but realized the road ahead was going to be substantially more difficult and so made the decision to sell the business, earning a two-year IRR of 122%. Running a second business with a worse economic profile than Wright Gardener wasn’t going to be as valuable an endeavor, and thus they renewed their focus on Wright after the sale. Nick has also been thinking more about search investing, having reduced his investment activity due to the declining economics he’s seeing. We talk about this change of thought, his interest in investing in public micro-cap stocks, and deeper, more targeted industry theses.

Clips From This Episode

What college class would you teach?

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(2:39) – Updates since Alex and Nick last spoke at the outbreak of the pandemic

(5:35) – Nick’s venture into acquiring a commercial landscaping company

(9:49) – Selling the landscaping company

(19:30) – What changed in your growth approach with this second business?

(22:35) – How have the last few years been for The Wright Gardener from a growth perspective?

(24:24) – Why have you slowed on investing in Searchers?

(26:53) – Do you get the sense that terms have gotten worse or the quality of deals has declined?

(28:45) – What’s been your experience with investments since slowing down?

(29:48) – What’s your interest in Micro-cap stocks?

(35:28) – How do you think about expanding your network from Search into Micro-caps?

(36:28) – What’s your long-term vision for this Micro Caps approach?

(38:35) – What other topics or ideas are you focusing on?

Alex Bridgeman: The last episode, we talked about the Wright Gardener and some of your revenue segments going to zero like mid COVID. I think our episode was like early 2020, like mid COVID outbreak when we last had you on the podcast. I’d love to hear an update since then, and then the other landscaping business that you acquired and have since sold. There’re tons to update on both those businesses. But let’s start The Wright Gardener. How did things progress after our episode?

Nick Haschka: Yeah, so with The Wright Gardener, things came roaring back in a couple of different spurts. And everything has kind of been a bit whipsaw-ee over the last couple of years. I mean, we went from basically halting operations and laying everybody off on I think March 19, 2020, at the onset of the lockdowns to then slowly restarting operations, slowly bringing people back, getting our operation totally reworked to accommodate the new operating modes that were viable mid pandemic, a lot of replacements, a lot of service restarts, a lot of service kind of start overs where all the plants got replaced. So, the team has never been busier. And the team has never been better and positioned to scale and deliver at a volume that we’ve just never been able to do before or pre pandemic weren’t able to do. So, we’ve used the opportunity to just retool a lot of operations, improve our overall management culture, team across the board. And we’ve, I think, finally surpassed the high watermark of February 2020 in the core office plant service business. So that’s exciting. We’re seeing some softening now. But that’s kind of been the story of COVID is things get busy and exciting and you see really fast growth and then things slow down again or even dip and come back. So, we’ll see what the future holds. But overall, I think we’re in a really good position to capitalize on long term. I think it’ll be a nice long term growth story for the indoor office plant business. Right now, still focused on the Bay Area. We do have operations in Sacramento and sort of just outside the Bay Area in the Central Valley. We’re starting to think more about what geographic expansion might look like and improving our strength in the parts of the Bay Area where we’re not as strong operationally and just from a sales and density standpoint, because of historically, we’ve been very strong downtown San Francisco. Downtown San Francisco, many of have probably heard, is going through some struggles right now, don’t know what the future holds for that. It will behoove us to improve our operation in the Oakland area and in the San Jose area, and then think more about some other geographies as well.

Alex Bridgeman: And then do you want to dive into the Vargas round trip as well?

Nick Haschka: Yeah, so maybe I can go back. So, once we had Wright Gardener going pretty well, we had the management team in place, my partner took over the day-to-day CEO role of managing a management team, we had a decent number of outdoor landscaping clients in the city. And so, we had developed some capability and expertise around just commercial landscaping but at a real basic level and in a more urban context. We had the qualifications to pursue a landscaping license and had started looking at some commercial landscape portfolios, I’d say going as far back as 2018, 2019 timeframe, late 2018, early 2019 timeframe. We had looked at a couple of businesses. We got close on some, buying a portfolio of commercial landscape maintenance clients, just didn’t get there. When COVID happened, and the lockdowns came through, around that time, maybe either just before or just after, I’d been approached by a broker who had a book of commercial landscaping business coming for sale, and an older guy in his late 70s who had been running the business for 52 years. And it was actually just a really good fit, and it was a better book than anything we had seen before, a slightly bigger business and more robust operation, albeit still very small. We’re talking like eight people, about a million in revenue, 200k or so of earnings. And he was not really focused on getting top dollar. He just wanted something that was easy, somebody that would come in and take care of things, take care of his clients, make sure the key employees had a good landing. And so, it worked out. It was a really great fit. From our standpoint, we had been on the lookout for commercial landscaping, hadn’t pulled the trigger. This was a great value. It underwrote pretty well from the standpoint of not that much could go wrong. He had declined some, so it was a little bit of a turnaround situation. But we felt comfortable with it at the price we were paying. Like it couldn’t be a disaster. And on the upside, we thought oh, well, if we like landscaping, and this turns out to be easier than we think it’s going to be, then maybe this company could grow in a much bigger market. The addressable market in landscaping is just orders of magnitude larger than the addressable market in indoor office plants. So, we said, let’s give it a try. And we put a manager in place at the very beginning. So, kind of took that earnings hit out of the gate, but we were able to fix a bunch of things, make some improvements, try to improve the client experience, get operations a bit more organized. Because when we came in, even the client list wasn’t really written down; they had a stack of invoices, but the routes weren’t written down. So, we really had to go in and like kind of soup to nuts, overhaul the operation, put in new equipment and all that. And we were able to do that relatively quickly. And we had a good service manager in place who could really take the reins on a lot of that. We did a small add on. It was actually the seller’s brother who approached us and was jealous that his brother didn’t have to work anymore. And they had a little mini family rivalry in the commercial landscaping business outside of San Jose going for, I think his brother had been running for 40 something years. And so, we were able to add and grow, but it was still like a very small operation, very fragile. Little things that go wrong could really eat up a lot of earnings. But I think the thing we did learn that as while we were able to get out of the gate and make a lot of obvious improvements quickly compared to some of the competitors out there and some businesses that were just 10 times or more our size that we are competing with on a day-to-day basis, it is a very tough business, very competitive. And it’s harder to compete with these big landscaping companies that have scale and operating cash flow that they can reinvest than we had probably appreciated at the outset.

Alex Bridgeman: So, you recently sold it too. And that was a whole interesting story as well. I’d love to dive into that a little bit more.

Nick Haschka: Yeah. So after about a year, a little over a year, we had made a lot of changes, we’ve made a lot of improvements, we’ve actually delivered a decent amount of growth, and we had overcome that initial financial hit we had to take to bring a manager in over the top of just the landscaping portion of the operation, we kind of found ourselves wondering, is this business going to make it long term? What does the future hold for it? And I think we’re seeing regulatory changes pretty fast and furious, one of which happened kind of just before the strategy, which was California banned the sale of gas lawn equipment. And so, what we were facing was a complete turnover in all of our asset base and transition to electric, which was going to be pretty expensive because the electric equivalent to most of the equipment we were running is on the order of 5 to 10 times more expensive. And so, the capital intensity of this business is going to increase dramatically. But on the labor side, labor was getting a lot tougher, the flow of migration had kind of all but stopped. And so, there was a tightening. In the initial period, when a lot of the service work just halted or laid off everybody, that actually created kind of a glut of labor availability, and we were able to- that really helped us and made the transition easier because we’re transitioning at a time when a lot of people were out of work and were willing to do anything to just be working, and especially to be working in a safer environment, like working outdoors. That helped us. But that started to stop and actually reversed completely the opposite direction once hotels and restaurants started opening and hiring back again. And we had guys who would leave their landscaping jobs and, say, go cook in a kitchen. And the wages that they’re offering to do that couldn’t compete with landscaping wages because it really just fundamentally altered the economics of labor in the market here. So yeah, after about a year, things started to get real tough, and we started to notice how tough it was going to be to get this business into really a steady compounder. And so, we started talking to some of the other owners. We went and found the owners of some of the competitors who we held in highest regard and just started talking to them and saying, “Hey, here’s the business, here’s what we’re doing. We’re not sure a business like this can make it in the more capital intensive, competitively intensive version of this industry that we think is going to prevail over the next several years. Is there a way we join forces?” And so, we went down the path of a couple of those conversations. We talked to some other founders who had been through it. And what they described was, from where you’re at now to where you should aspire to be over the next two to three years, they’re like, that was the hardest three years of my life. And I don’t know if that was motivated advisory, but it seemed prescient from my standpoint, and I could totally relate to it. And so we got into a couple of these conversations. And as we started talking to these guys and understanding what that kind of would look like, we got into financials. And I think that was the point at which we realized that maybe we’re not the ones, maybe we don’t want to be the ones to own what would be on the other side of a combined entity. Because while we like the business, and it’s doing okay, we’re just not sure landscaping is the highest best use of our talents and our motivations and all that. And so, what we ended up doing was finding an even bigger company and talking about the industry with some of these folks, we were kind of talking about what was going on. And there’s a lot of private equity activity. There’s a couple of new ventures. There’s a couple of large regional landscaping companies going national. And that is really intensifying the competitiveness of the business and putting downward pressure on prices and all that. We came across an interesting character in the industry named Richard Sperber. And the story with him was that he was the son of the founder of a company called ValleyCrest, which is a very, very successful landscaper based out of Southern California, got very, very big on the West Coast. And he was the chairman and CEO through most of the period of really rapid growth of ValleyCrest. And he merged the company with another company I think that was more focused on the East Coast, and essentially ended up selling ValleyCrest and merging it with this other company and formed what is now called BrightView, which is really the only publicly listed landscaping company and probably the most well-known landscaping brand there is because they drive really nicely branded, fancy, shiny new white trucks. And he left at that point. And I think he had a non-compete for a few years, and so he was out for a little bit. And then, when his non-compete expired, he formed Sperber Landscape Companies with the intent of redeploying some of the proceeds that he had taken from the sale back into the commercial landscaping industry and forming a new group of landscaping, of regional superpower landscaping companies built on the back of acquiring the best companies in every market that he could get a hold of. And he had acquired a handful of companies throughout the US, really what I would consider to be marquee kind of elite landscapers, one of which was in the North Bay, just north of San Francisco. The company is called Cagwin & Dorward, and long, storied history, really known for excellent quality, great employer, everything you would want in a landscaping company. And so, we went and talked to him. And he saw what we saw, which was the opportunity for Cagawin, who was really strong in the North Bay and fairly small in the South Bay where we operated, to add and have us join their South Bay branch and really combine our little operation into their very big operation, but we actually formed a fairly meaningful piece of the local market branch that they had been working on and building. And it was really just a nice fit. And it was a relatively simple and straightforward transaction that went very quickly. They were easy to deal with. And I think everybody came out happy. The employees ended up making more money and a couple people got great raises and promotions. And we were happy to sort of be out of the day-to-day grind in a business that we weren’t sure about for the long term.

Alex Bridgeman: In any of your discussions with Richard, did he talk about things that he’s done differently with his own company versus ValleyCrest. Like now that it’s his kind of second time around the block and it’s I imagine mostly his own money at this point, has he talked about things he’s doing differently?

Nick Haschka: No, I’ve only kind of been able to learn it by following the trail and looking into the companies that he is acquiring. In talking with his team, I mean, our interactions with him were pretty brief and to the point. He basically made an offer to acquire in the first call after two brief email exchanges. He researched my background, he knew who I was, and he was basically ready to help and make it happen. And then he handed me off to his head M&A guy, and we were off to the races and pretty much had a deal done in a few days.

Alex Bridgeman: Was there something that from that trail you mentioned or just observing some of his deals or how his companies operate that you can kind of pick little pieces of information of how he’s running things today versus how he may have run them years ago?

Nick Haschka: Yeah, I think he’s staying more decentralized. BrightView is pretty consistent in how it operates nationally and how they brand, and it sounds like the Sperber Landscaping Companies is being formulated as a group of elite regional landscapers where there’s a lot of decentralized authority. Like the Sperber Landscaping Companies is a convener, and they are almost a thematic entity in terms of like here’s what we’re about. But really what they are about is being the collection of the best landscaping companies in every market. And so, I think they’re not striving to consolidate and drive everything top down, like Brightview has tried to do. And while they may sacrifice sort of technical efficiencies that could be gained on a spreadsheet, I think they will be rewarded with local knowledge, local expertise, a little bit more of an entrepreneurial culture of being able to adapt and continue to preserve the great qualities of the companies that they’re acquiring, which is this just regional dominance attuned to the regional needs. Because in landscaping, really climate zone makes a huge difference. And a Northern California landscaper is actually pretty different from a Southern California landscaper in terms of what the operational needs of the business are. And so, they’re able to preserve that in a way that I think it’s just too difficult and too complicated to manage centrally through an entity like BrightView. And I think they stand a really good chance of giving them a good run for their money by setting up that way.

Alex Bridgeman: And in discussing The Wright Gardener purchase, you talked about how buying something small quickly and then growing it over the next couple of years was, to you, the most interesting model at that time for the way you wanted to go about entrepreneurship through acquisition but then you’ve now kind of gone that path that you would have had to take with Vargas going from kind of a small like sub 500 to a million in earnings. You’ve done that with Wright Gardener, but you when you decided to not do it with Vargas, and you didn’t want to do that path again, what changed about your initial idea of buy small and grow with this second business?

Nick Haschka: I think ultimately what was different was the business selection. So, the plant business is a much smaller niche, gets a lot less attention. The competition is no where near as fierce. The customer stickiness is higher. In landscaping, it is a national business. There are big scary national competitors. There’re tons of private equity money flowing in. There’re tons of excess cash flow off strong regional players flowing in. So just the intensity and size and scale of the landscaping business as well as the capital intensity, the administrative intensity, there’s just a lot more there in the landscaping industry. And selecting into that business, I think we realized the strategy and playbook that we executed on the office plant side wasn’t going to yield the same results on the landscaping side. And so, I don’t think I was necessarily wrong, but I was maybe incomplete in the evaluation or the thought process and conclusion around just getting in to get in fast. And the context was different too. Necessity is often the mother of invention. And we didn’t know how much time- at the initial purchase, we didn’t know how much time we had to search. We didn’t really know what we were doing. So, we just had to do something in favor of doing nothing. And then the second time around, we applied sort of the same approach, or call it misapplied the same approach. And we didn’t really need to do it. And I don’t regret it. I think we made- it was the best decision we could have made at the time given the circumstances. But going forward, I don’t know that I would do that same approach again. I think we would be more deliberate in what business we want to get in and why we want to get into it, what the long term play is, and potentially focus more on proprietary outreach versus just taking what the market feeds and being much more calculated and thoughtful about business selection, which business we want to be in from an industry standpoint, which niche, and then which actual company and business we’re hoping to operate and grow.

Alex Bridgeman: And you mentioned earlier that one of the landscapers you talk to or landscaping owners you talk to described that growth period from 200 to a million being the hardest three years of their lives. How has the last couple years been in that journey for Wright Gartner? When hearing those stories, does it sound like your experience was just as difficult? Or is it just difficult maybe different ways? How does your experience compare to what you’ve heard from others in that same kind of growth path?

Nick Haschka: Yeah, I think it varies by business. So, in The Wright Gardener, we actually started with a middle management layer. Whereas in landscaping, I think what the organization looks like is a little bit different at various levels. If you were to map the organizations side by side and sort of revenue and earnings trajectory, because the margin structure is different, the cost structure is different, and the org structure is different, the difficulty probably has more to do with what the organizational structure looks like and what people and resources you have at your disposal. With plant scaping, that growth trajectory actually had a decent structure in place at the beginning of that journey. Whereas with landscaping, it was very flat. It was like manager, and then everybody else was a worker, one manager. And that’s what a million-dollar landscaping company looks like. Whereas a million-dollar landscaping company might actually have some forming of a management layer. I think the challenge is more related to that, building that organization and adding that layer. And where you add that layer is going to vary by business, or like what point of revenue you add that layer is going to vary by which business you’re in, what the margin structure of that of the business is.

Alex Bridgeman: Another thing we discussed recently was how you’ve cooled slightly on investing in searchers. I know that was part of your path that you had envisioned for yourself for a number of years, and I get the sense that a few things have changed in kind of your view on search investing. Can you describe some of those changes?

Nick Haschka: Yeah, so the market for search, especially on the self funded search side, has got pretty frothy from an investor’s or from the standpoint of a searcher seeking out investors. The search entrepreneurs had a lot of power and a lot of choice in terms of which LPs to bring in, how to price those rounds, the preferred rate of return on some of those equity offerings was getting pushed down, and the conversion terms in terms of how much common equity you get as a preferred investor were getting more and more unfavorable from the investor’s point of view largely because of just an abundance of LP capital flooding the market and the instrument of sort of search acquisition investing becoming more mainstream and more accepted. And it kind of got to the point where we just thought a lot of the deals that we were seeing were never going to exceed the preferred rate of return. And at that point, you’d be better off going into bonds or something real safe, and then pair that with like a total market crash that we’ve seen in equities and bonds, the calculus becomes even more in favor of just going into the more traditional passive investing because it doesn’t seem like the terms on search have really changed. I keep seeing deals that kind of look the same as the deals that I saw last year in terms of the economic outlook. And I personally think that’s not going to last. I think it’s just the private market and the way offerings are priced is going to move slower than the public equity, the public markets move. And capital scarcity hasn’t really set in yet. I think they’re- and it may be another year or more before capital scarcity arrives. But I think it’s only a matter of time for the pendulum to swing back in the other direction and capital to become a bit more scarce again, and that will move up the preferred rate of returns that a search entrepreneur is going to have to offer to investors to get a round filled up. And they’re going to have to underwrite to more conservative operating scenarios and probably higher rates of return on those offerings.

Alex Bridgeman: Do you get the sense that- you mentioned kind of a decline in either quality of the investment for investors or just terms. Do you think it’s more that terms have gotten worse, or the quality of the deals on average has declined over the last year or couple of months, or maybe a combination of both of them?

Nick Haschka: Yeah, so in terms of business quality of what I’ve seen come through on search investments, it seems like searchers are having to get a bit more creative and expand the aperture of what a good search acquisition looks like, which I think is ultimately, on average, to the detriment of business quality. And that’s because I think the most down the middle type of deals are harder and harder to come by and have gotten bid up to higher and higher prices and flooded with more and more strategic money, institutional money, lower middle market private equity has come down. So yeah, I’d say on average, deal quality coming through for the main street search entrepreneur, the possible, the types of deals that they can compete and win on have overall, on average, gotten worse over the last few years. It’s just gotten more competitive, it’s gotten harder, and that’s going to be reflected by what goes out to equity LPs. They’re going to see overall worse stuff. And it’s not that there aren’t good ones coming through, there are still some. But it puts the entrepreneur in a really good position who is able to get one of those really high quality ones to negotiate really favorable terms with their investors. And that is, for us, what has sort of left us out because the best quality stuff, just it’s really hard to believe even the base case returns because of just how aggressively they’re priced.

Alex Bridgeman: So, have you made a few search investments? Or what’s been your experience so far with the deals that you’ve had?

Nick Haschka: Yeah, we’ve made a few search investments. The last one was a generator company in the Pacific Northwest with an operator we’ve known for several years and had mutual backgrounds. So, people we’ve been closer to have been the people we’ve been more inclined to invest with, places where we’re value add, and we actually have spent real time in thinking about that business are places where we focus, and we’ve tried to shy away from stuff where we just really don’t know very much or can’t even see ourselves being very useful. Because we just tell people, you’re probably going to find somebody that’s going to be more valuable than us to go on this journey with you. And we try to just be true to that. And at the same time, we’re going to enjoy investing in the things that we feel like we’re being helpful, and probably it’ll be more satisfying for both parties.

Alex Bridgeman: Gotcha. And I was also excited to hear that micro caps are kind of coming into your picture a little bit more. That’s the work that I was doing prior to working on the podcast full time was looking at micro-cap stocks and that’s a world I’m familiar with and was kind of jazzed to hear a bit about. So walk through that exploration. What’s your interest in that area?

Nick Haschka: Yeah. So now that I’ve got a little bit more time on my hands, the day to day of landscape operations has pretty much ceased, I have started opening up new lines of inquiry. If you scroll through my Twitter feed, you’ll see such a random amalgamation of ideas. And some of that is just a reflective of what’s on my mind on that day. But with respect to micro-cap, we’ve given some thought to the micro-cap market, and all public equities has been pretty massively impacted by these latest drawdowns. And so, what that creates, I think, is buying opportunities that haven’t existed for 10 plus years, and especially relative to the buying opportunities in, say, search investing. And so, we’ve started to look more vigorously at public market opportunities and trying to think about where we might be able to add some value, have some unique insight, or have a unique angle on. And we can relate certainly more to a micro-cap stock than we could a large cap just because they look more like things that we’re familiar with, and albeit a different because they are publicly listed, they’re a little bit more institutional in nature. But at the same time, we do have some expertise and experience from prior experience, before getting into small business, in those types of issues. And so, it’s almost putting together the best of what we have encountered in our last, say ,10 years of our careers. And micro caps are almost a mash up of those two. And so, we are thinking about opportunities in activism, opportunities in just straight up long only equities. And it’s still early days. We haven’t made any big moves. Right now, we’re just trying to study and see what we like and build our own framework for how we’re going to think about these opportunities and how we underwrite them and how we’re going to approach it.

Alex Bridgeman: Yeah, there’s some phenomenal micro-cap investors out there today that you can study. Connor Haley did an episode with Chris Powers on the Fort podcast, which was a phenomenal breakdown for Connor’s strategy. Connor’s been one of the most interesting investors in that space to study. His strategy continues to evolve in interesting ways. So I’m sure you’ve already looked into his stuff. But he is one I would look at very closely and kind of watch what he’s doing. But what I also found interesting about or continue to find interesting about micro caps is how a lot of the issues that management describes in calls and filings are very similar to what you hear from a search CEO that’s running businesses that are sometimes larger than the microcap. Like the public equivalent is often smaller than what you hear a search CEO running in the same industry. I think that creates some really interesting kind of crossover that you’re describing.

Nick Haschka: That’s really surprised me as I’ve dug into some of these filings, how common it is, and it actually has excited me a bit about some of these companies because it makes me think that, oh, maybe our experience is relevant here, and maybe we do have something to add. And I was actually talking to Connor yesterday about his strategy and some of their investments and sharing our story and kind of what we’ve experienced and talking a little bit about the research crossover between public equities and private markets. And so yeah, we have a lot of interesting notes to compare and discuss, as you alluded to.

Alex Bridgeman: Yeah, that’s outstanding. That’s very cool to hear. He’s really done a good job taking what is often kind of a one-man shop and building a team around a system for micro-cap investing, which is really, really neat to see. Are there any interesting notes that sounded similar to how you’ve thought about the process or how you look at search investing that are similar to what he’s been doing?

Nick Haschka: Yeah, I think the glaring shortfall that I realized in talking to some of these folks is how little we’ve invested in just fundamental research and in exploring some of the tools these investors are using to discover and develop insights and angles. We’ve done very little to none of that. And it’s possible that in the areas that we’ve historically looked at in small business, there just isn’t that much. Because I think in a lot of the best opportunities, there isn’t like a good public comparable. But what you can do is figure out the next closest thing and look and read about that. And so, I’m envious of the tool sets that they have and the resources they’ve been able to get themselves access to because we haven’t historically been willing to spend that kind of money on just basic insights.

Alex Bridgeman: Yeah, and a number of investors, Connor included, have also talked about, and Ian had something about this, where having a network of CEOs and other investors you know in this space is super helpful for understanding other companies. So, I think Ian Castle said something like, if my memory is wiped one day, and I only get to write down one sheet of paper for notes to help me like get back, he’d just write down the list of all the CEOs he’s gotten to know and like their phone numbers and just start calling them and how valuable that network is. Obviously, there’s this- you have a network in search, but how do you think about kind of expanding that network into micro caps? Because all of these companies, like they are similar size or smaller, and so the management teams are also more accessible in that sense, too, because it’s not that much more difficult or sometimes it’s easier to get a hold of a micro-cap CEO as it is to get a hold of a fellow search CEO somewhere else.

Nick Haschka: Yeah, that’s- I mean, developing that list, I think we’re in the process of developing that list. And we’re trying to be informed about how we go about it so that we know what we’re talking about when we go and talk to some of these folks and at least know in what ways we might be valuable. And so yeah, we’re just kind of in the process of starting some of those calls to talk with some micro-cap investors, potentially some micro-cap CEO type folks. And yeah, it’s still, like I said, early days for us in this space, but I’m excited about where this might be able to take us.

Alex Bridgeman: Yeah, certainly. And there’s a number of other macro cap search investors. There’s a guy on Twitter, Eight Track, he’s somewhat anonymous on Twitter, but he had this family eyeglasses business that I think was throwing off maybe, I’m guessing it was probably like a million bucks a year or something like that for decades. It was a family business that he was running. And he used the earnings to invest in micro-cap stocks and did really well with a couple, X Bell being kind of like the headliner name that he did really well on, but created a pretty nice fortune for himself. But it’s neat to see examples like that, where if you have kind of that cash flowing business, and you can invest in micro-caps on an ongoing basis, that creates some pretty cool outcomes. Do you envision something similar for yourself? Or do you think this would be a fund or a broader strategy one day? Or do you imagine kind of keeping it within the business and just within your own holdings?

Nick Haschka: Yeah, I think we’ll probably skew heavily toward keeping it within, mainly because I think that once you get really big, you introduce a whole new set of problems that create strategic challenges for you. And what works on a small scale doesn’t necessarily work better on a big scale, in fact, quite the opposite. And so right now, we’re just kind of looking to figure out what will work at the scale that we’re at and focus on that, not try to hop up and scale and do something that’s entirely untested at a much larger scale out of the gate. Instead, we’ll just kind of focus on what we got and see what we can do with that. And some of it is to prove it to ourselves. We approach these things as if any new line of investing or even business at any time, you have to go in pretty humble, knowing what you don’t know and knowing where you might be wrong. And ultimately, you’re making a calculated, if you’re going to act and make an investment, you’re making a calculated bet that you know more or you at least put yourself in a good situation where you’re likely to succeed even if it’s not a sure thing, because nothing’s a sure thing.

Alex Bridgeman: Yeah, certainly. You mentioned other lines of thought that you’re now able to kind of learn more about now that you have some more time on your hands. What other topics or ideas in your mind are you focusing on and you have focused on for the last couple months?

Nick Haschka: Yeah, so there’s two big ones. One is the existing operating business of what does it look like for us to really lean into that and see how far we can take it. So, I have mixed thoughts on that, what that would or could look like, and how we would pursue it and all that. And then the other one is formulating another search thesis. One thing I’ve seen be very successful is people who go into search with a pretty clear idea of what business they hope to build. And it’s fairly specific. And it results in a very short list of potential companies they could acquire. And they just go at that list with full hell bent on doing that idea. Come hell or high water, they’re building this business, and acquisition is the fastest path to do what they want to do. And I’ve seen that be successful, and it’s potentially a higher chance of a strikeout or a two-year burn with no real results. But with the operating business, for us, that might be a possibility to formulate that thesis and figure out where we have a lot of energy and excitement and a business that we think could really be an amazing ride and home run. So, I don’t know what that is. It takes quite a lot to figure out where kind of the intersection of skills, passion, opportunity.

Alex Bridgeman: Yeah, I think the Higgins family at Chenmark has talked about earning the right to take risk. And with The Wright Gardener being a solid growing business, you kind of have earned the right to be able to take some bigger bets here and there if you want to. Do you have a sense for specific industries or theses that sound most interesting to you?

Nick Haschka: I don’t know yet. I know I’m pretty regionally focused because I like it here. I’m in Northern California. I don’t intend to go anywhere else. I think to really do a great job on an operating business, it’s really hard to do that remotely. So that has me thinking carefully about what is here, what should be here, what will always be here. I always have trepidation about a manufacturing business in Northern California because I just don’t know like is that base, is that durable, is that long term? I always have reservations about things that are swimming upstream of the kind of overwhelming trend, and I would much rather be swimming downstream. So, on the contrary, one trend here that I don’t know that much, I don’t have much specific domain expertise, but San Francisco Bay Area biotech is absolutely booming. We’re seeing that in the office plant business. We have so many biotech clients building out new offices, new labs. I think there’s got to be opportunity there to formulate a very specific thesis about how you build a more local service-oriented business around that boom that could benefit from what will likely be a multi decade build out of biotech business infrastructure really in all versions, pharmaceuticals, ag, food. You name it, biotech is kind of burning on all fronts here. And there’s some others too. So yeah, we think carefully about the regional specifics and where the region, where our region has some real global competitive advantages and how to ride that.

Alex Bridgeman: Certainly. Well, I’m excited to hear kind of how that evolves along with the micro-cap stuff. But thanks for coming on the podcast and sharing a little bit more. It’s always fun to chat.

Nick Haschka: Yeah, thanks for having me.

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