Dec 10, 2018 · 1h 12m · capital-allocators
Brent Beshore - Micro Buyout Adventur.es (Capital Allocators, EP.79)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Brent Beshore, founder and CEO of Adventur.es, to explore his unconventional permanent capital model for acquiring and holding small, family-owned businesses. Beshore breaks down his unique approach to all-equity deal structures, inbound proprietary deal sourcing, rigorous in-house diligence, owner earnings valuation, and long-term value compounding.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 14.7% of the talking time here. How this is scored →
Ted as informed peer 3.0 Guest teaching 4.5 Guest disagreement 1.7 Ted pushing back 0.1
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 28:15 Rejection of the Money as a Commodity Premise
Brent forcefully rejects the prevailing Wall Street belief that capital is purely interchangeable, arguing that money is intrinsically attached to people and operating mindsets.
Hardest push from Ted ▶ 32:48 Questioning Broad Sourcing ComplexityTed challenges Brent on whether evaluating highly diverse and unglamorous niches creates an unmanageable diligence burden.
Biggest teaching moment ▶ 44:40 Exposing EBITDA Mirage in Working Capital Heavy BusinessesBrent walks through an extensive real-world breakdown showing how an apparent 8 million EBITDA business was actually net cash negative once CapEx and working capital were factored in.
Ted holds their own ▶ 52:50 Clarifying Fund Terms and LP Trade-offsTed leverages his intimate insider perspective as an investor in Brent's fund to frame the strategic implications of a zero-management-fee permanent structure.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Early Entrepreneurial Spark and Monopoly Probabilities | 2 | 3 | 1 | 0 | Ted prompts Brent with straightforward questions about his early interest in business and first ventures. Brent explains his early Monopoly probability calculations and details why his initial event marketing business was structurally flawed. | |
| Identifying Personal Superpowers and Managing Operational Messiness | 3 | 4 | 1 | 0 | Ted asks Brent about the shift from grinding operator to investor lens. Brent reflects on identifying core superpowers versus operational messiness and the hazard of pivoting too frequently. | |
| Anchor Businesses, Expertise Compounding, and Capital Redeployment | 3 | 5 | 2 | 0 | Ted asks Brent to break down his strategy of establishing anchor businesses. Brent explains how expertise and capital compound similarly and critiques small business owners who reinvest cash into low-return opportunities. | |
| Falling Backwards into Private Equity and Differentiating Adventur.es | 2 | 3 | 1 | 0 | Ted asks how Brent transitioned from owning a few operations to actively seeking acquisitions. Brent explains how he fell backwards into private equity without formal training and differentiated his offering for sellers. | |
| Conservative Capital Structures: Avoiding Senior Debt and Preserving Optionality | 4 | 5 | 2 | 0 | Ted probes the distinction between Adventur.es, traditional PE, and search funds. Brent details his aversion to senior debt and financial engineering, explaining why keeping debt low preserves operational optionality. | |
| Inbound Proprietary Sourcing and Cultivating Positive Selection Bias | 3 | 5 | 3 | 0 | Ted asks how Brent builds awareness among sellers. Brent critiques traditional outbound PE call centers and auction processes, emphasizing inbound proprietary deal flow and rejecting the idea that capital is a pure commodity. | |
| Filtering Sustainable Businesses from Single-Operator "Hustles" | 3 | 5 | 2 | 1 | Ted asks what fraction of incoming leads receive serious attention. Brent contrasts sustainable distributed-judgment businesses with single-operator hustles, and explains why he looks at unglamorous or cyclical niches. | |
| In-House Diligence Capabilities and Process-Driven Operations | 3 | 5 | 2 | 0 | Ted asks if broad mandate screening increases pipeline difficulty. Brent explains Adventur.es' 22-page checklist and why they insist on conducting diligence in-house rather than outsourcing to consultants to cover themselves. | |
| Sponsor Message: Ridgeline Front-to-Back AI Platform | 3 | 6 | 2 | 0 | After an ad break, Ted asks about on-site red flags. Brent details how owners falsely claim irrelevance when they actually make every decision, and describes situations with severe accounting opacity. | |
| Valuation Realities: EBITDA versus True Owner Earnings and Working Capital | 4 | 6 | 3 | 0 | Ted brings up business valuation in the micro buyout segment. Brent unpacks how top-line EBITDA numbers can be deceptive when accounting for maintenance CapEx, interest expenses, and working capital drains. | |
| Deal Negotiations, Letter of Intent Pitfalls, and Extreme Reliability | 3 | 5 | 2 | 0 | Ted asks about the negotiation process with owners. Brent explains why 80% of LOIs in the micro space fail to close due to fundless sponsors and emphasizes the competitive edge of pricing reliability. | |
| Structuring a Permanent Capital Fund with Zero Management Fees | 5 | 4 | 2 | 0 | Ted references his own LP involvement and discusses the decision to raise external capital. Brent explains why he chose a permanent capital structure with zero management fees to avoid misaligned deal pressures. | |
| LP Fundraising Dynamics and Internal Organizational Depth | 3 | 4 | 1 | 0 | Ted asks what Brent learned raising institutional capital for the first time. Brent details navigating LP dynamics, screening out misaligned investors, and relying on internal team depth. | |
| Case Study: Acquiring TEPCO and Enabling Long-Term Growth | 2 | 4 | 0 | 0 | Ted asks Brent to walk through a specific case study. Brent outlines the acquisition of TEPCO, illustrating how the succession plan worked and how patient capital enabled geographic expansion to Las Vegas. | |
| Publishing "The Messy Marketplace" and Scaling Educational Content | 2 | 4 | 1 | 0 | Ted asks about Brent's content strategy and his new book. Brent explains how writing 'The Messy Marketplace' functions as a 10-hour scalable conversation with prospective sellers. |
Statements from this episode (30)
Beshore: Event marketing is a flawed model due to labor intensity and poor scalability
“So if you look at the event marketing business, it's heavy labor and scalability is really challenging. It's location dependent. And for the most part, it's a, what I call a devalued service.”
Beshore: Services perceived as easy are poorly compensated despite actual difficulty
“So it has weird optics associated with it that anything that's not valued as being difficult is not going to be highly compensated. And so you have an interesting combination where it's a really difficult business to perform and it's just not that well paid.”
Beshore: Small business owners frequently destroy value reinvesting excess cash poorly
“By the way, this is the challenge that most small business owners get into is there's not really that high return opportunities for the cashflow generated. So you're generating a lot more cash flow than you are opportunities to deploy that cash flow, and so wh…”
Beshore: Adventur.es defaults to accumulating cash until exceptional opportunities arise
“And, you know, our default is not to do anything. We're fine just building cash. We're fine sitting on our hands, but then you have these opportunities that come along that you want to have the highest opportunity cost in the world.”
Beshore: Adventur.es offers a distinct acquisition product from PE and search funds
“So what we do today is we try to consistently express our opinions about what we're looking for, about how we work, about why we're going after certain segments. We try to make our value proposition incredibly clear in the marketplace of we're offering a diffe…”
Adventur.es closed its last two acquisitions without senior debt
“The last two deals we've done with no senior lender involved. We've done all equity with a combination of equity and seller debt.”
Beshore: Wealth is almost always built through family businesses
“Wealth is built Almost always through family businesses. That's how wealth's built. So if you look at every wealthy family, it came from them. Somebody started a business. They were an entrepreneur. They grew that business potentially over generations, and it …”
Beshore: Private equity cannot make 5 to 10 year investments
“One of our favorite questions to ask is what are investments we could make today that wouldn't show up for five or 10 years? Private equity just can't ask that question.”
Beshore: Adventur.es targets companies with $3M to $8M in free cash flow
“Our kind of target market these days is three to eight million in, in free cashflow is kind of where we are, which is right on the cusp, kind of a little bit below private equity and a little bit above search funds.”
Beshore: Search funds are down-market PE with built-in operating partners
“I think that search funds more closely resemble private equity. It seems like sort of combination of down market private equity with operating partner that's already built in is kind of how I think about search funds.”
Beshore: Adventur.es avoids competitive auctions to prevent overpaying
“We typically, with very rare exception, don't participate in auctions. We just subscribe to the winner of an auction is the biggest loser, sort of by definition, you pay the highest price.”
Beshore: Adventur.es is the wrong buyer for 90% of sellers
“90% of the time we're the wrong buyer. 90% of the time a seller just wants the most cash at close, the least risk, and it's a pure financial decision.”
Beshore: Traditional PE outbids others via heavy leverage and slashing staff
“And they, by the way, they can pay more because they're loading it up with a tremendous amount of non-recourse debt. They're going to slash and burn the team. They're going to treat people for a short period of time while they own it terribly, right? Well, of …”
Beshore: Adventur.es conducts deep diligence on about 15% of inbound deals
“In terms of real work, I would say probably 15% of the businesses that come through, we take a really close look at.”
Beshore: Adventur.es conducts diligence in-house unlike traditional private equity
“What makes ad ventures very unusual is that we do almost all of our diligence in-house. So this is very unusual in private equity. Most of it's outsourced, both legal and financial due diligence is outsourced. They're even going to bring in Consultants to do p…”
Beshore: Adventur.es operates as a marketing and manufacturing firm, not private equity
“We don't think of ourselves as being a private equity firm. So we're not a partner led partner driven private equity model. We think of ourselves more as being a marketing firm, right? That's getting the word out about what we're doing, how we're doing it, try…”
Beshore: Small business sellers routinely falsely claim they are not needed
“Every single seller has this strange tension between saying that they're irrelevant to the business. They're not needed at all. And when you dig in, they're making all the decisions.”
Beshore: SMB owners treat accounting as retroactive scorekeeping, ignoring data
“Most of these people look at accounting as being sort of the scorekeeping that happens after the game is played. So play the game and then watch the tape. That's accounting. They don't look at accounting or sort of the financial data infrastructure as being a …”
Beshore: Aerospace acquisition candidate generated $3M owner earnings versus $8M EBITDA
“So we looked at an aerospace company where it was doing seven, eight million dollars of EBITDA. But when you got through all of the reinvestments and all of the dynamics in the industry, really the business was doing about three million dollars in true owner e…”
Beshore: Businesses must be valued on cash remaining after maintenance reinvestment
“The ideal thing is you want to value a business on after everything has been paid to kind of keep it on its current trajectory, right? And you have investments in leadership being made that scale with the company as it increases in size and heft. That takes mo…”
Beshore: Adventur.es avoids lowballing and enters deal talks near final price
“We don't do the whole, we're going to low ball you so that you high ball so that we meet in the middle thing. We typically, you know, if we're gonna use a football analogy of a hundred yards, we try to come in on the 40 yard line going to the 50 yard line, rig…”
Beshore: Competitors inflate bids by 30-40% with no intent to close
“Oftentimes we'll lose deals because other groups will come in and throw out a valuation that's 30, 40% higher than ours. They have no intention of ever closing. And on top of that, if you're a fundless sponsor, you don't even raise the capital yet. You haven't…”
Beshore: 80% of lower middle market deals fail after LOI
“The status thrown around sometimes like 20% of deals close after letter of intent in our area of the market. Well, why is that the case? 80% of deals after you've already come to material deal terms don't close.”
Beshore: Baby boomer business ownership transition wave has not yet hit
“The baby boomer ownership wave hasn't really hit yet, which is kind of surprised a lot of people, but I think it totally makes sense. You know, older demographics are getting older, but people are living longer and the health into old age feels like people are…”
Beshore: Personally invested 15% into Adventur.es permanent capital fund
“I'm a heavy investor. I'm a 15% investor in the fund. That's a lot of skin in the game.”
Beshore: Some LPs passed because Adventur.es charged zero management fees
“And investors, to be frank, some of them didn't invest in our first fund because we didn't have a management fee.”
Beshore: Adventur.es fund requires 75% LP vote to remove him
“And I think how we structured the fund, it's a true blind pool. There's no control. I mean, I think you know, the only control that the investors have is they have to 75% vote, I think. I think that's what it is. 75% level have to vote to remove me, and I'm 15…”
Beshore: Anyone under 50 writing a book is somewhat fraudulent
“In fact, I consider really anybody under the age of 50 who writes a book to be somewhat of a fraud, I think.”
Adventur.es Created Its Own Book Imprint Over Publisher Economics
“The idea that we do all the work and they do some editing and have control, and then we'd go out and sell the book and they would take 70 to 90% of the proceeds just didn't sit well with us. So we created our own imprint. The imprint is called boring books.”
Beshore: Fund managers constantly rewrite narratives rather than admit investment mistakes
“So redrawing the bullseye around the arrow after it's already hit is, is something that I pretty frequently see in the investing world. It seems like I read investor letters. Oftentimes there's sometimes is a very good justification for why the numbers maybe d…”