Not So Private Equity

3: John Claybrook – Bronco Ventures

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In this week’s episode of Not So Private Equity, we welcome John Claybrook, Partner at Bronco Ventures. John joins us to talk about founding Bronco Ventures after building and selling a successful valet trash and recycling business.

 

The Not So Private Equity Podcast is co-hosted by Ken Kanara and Steven Haug. Steven leads this week’s episode.

 

 

Steven Haug: This is Steven Haug, cohost of Not So Private Equity. We have a great discussion ahead of us today. Before we dive in, I want to thank our sponsor ECA Partners. ECA is an executive search and on demand consulting firm specializing in low and mid-market private equity. To learn more about ECA’s services, you can reach them through their website, eca-partners.com or message me directly and I’ll point you in the right direction.

I’m very excited to introduce our guest, John Claybrook. John is a partner at Bronco Ventures, a private equity firm that invests in profitable, established, blue collar businesses. John’s also a fellow Aggie and former Student Body President at Texas A&M. John, welcome to Not So Private Equity.

 

John Claybrook: Thank you, Steven. I’m so glad to be on. Honored to be invited.

 

Steven Haug: Thanks John. I’ve been looking forward to this conversation. Before we dive in to Bronco Ventures, I want to hear the story of Value Waste Services. Can you tell us about your motivation for starting that business and then the journey of the company?

 

John Claybrook: In 2017, I had this goal. I was 26 at the time, and I had a goal to help my parents retire by the time I turned 30. I woke up at the beginning of 2017, 26 years old and realized, I don’t have any money. Unless I do something crazy, I’m not going to accomplish this goal of being able to help my parents retire. I started looking for various businesses to start. I thought, I’m not a lawyer, I’m not a doctor, I’m not an engineer. I don’t have any of these skills that would allow me to make top dollar. The best way for me to do that is probably by starting a business.

Ultimately, I started a trash business, a trash collection company. We picked up trash door-to-door at large apartment communities starting in Austin, TX. There were a lot of other companies like this in Austin. It was a lot like a landscaping business, if you’re a commercial property, you have a lot of landscapers you could choose from. It was the same way with this type of service. We picked up trash door-to-door and there were probably 10 or 15 companies in Austin that provided this service. We got started in April of 2017 and over the course of three years, grew to be a healthy size. Healthy enough that our largest competitor acquired us in 2020.

 

Steven Haug: That’s quite a quick run, and a great success story. Tell us about that industry. You mentioned there were a few different players, but fairly small folks. What was your competitive advantage there?

 

John Claybrook: This industry was just like any other industry that we compete in now. The way we see it is in most lines of business, there’s a large national competitor. This is the 1,000 pound gorilla in the industry. That’s category one. Category two is you generally have some really strong regional players, whether it’s just in a particular city or a particular state. These are the companies that we strive to be really strong regional players where ownership is close to the problems, close to the people they interact with, the boots on the ground every single day. We think that’s what we want to live, is in that strong regional player type of business. Then there are a gazillion, what we call, “Mom and Pop shops.”

When we look at this particular type of trash service, it was no different there. When you look at the types of businesses that we’re investing in right now, it’s a very similar story so we’re pretty comfortable in that type of ecosystem.

 

Steven Haug: To scale the trash business was it just a matter of…were these contracts with large apartment complexes, were contracts with individual people inside of the apartments?

 

John Claybrook: When we signed a contract, we signed up the entire apartment community. Our average apartment complex is 300 units. It was 300 units and everybody received this service five nights a week starting at 8:00 PM. There were a handful of individuals who were very influential in this industry. The apartment world was very tight knit. Everybody knows everybody, and if you don’t know anybody, it’s really hard to do anything in that industry. We didn’t know anybody, and fortunately we were able to get into the apartment associations and we jumped in and were eager to serve and eager to get to know people. We had this rule where we didn’t talk business at any of the events that we went to. We were just there to get to know people and serve as much as we could. It turns out that building relationships with people is not only, I think the right way to go about business, but it’s also kind of an upside down way, it was the best sales that we could do, was just being friends with folks and serving them well. Once we got a foot in the door with right management companies, things took off very quickly. It was very hard to keep up. We were worn out by end of three years.

 

Steven Haug: I bet. How many employees did you end up with before you sold the business?

 

John Claybrook: We had about 115 employees when we sold it. That was the biggest challenge in all of that business was finding people who could pick up trash. We built out this outstanding leadership team. We had really good supervisors on the ground across the state of Texas and generally, we had a lot of luck finding people who were able and willing to do the work. Now in any, I guess less-skilled, blue collar type job, there’s going to be a ton of turnover. I’d compare what we were doing to a janitorial type service. In janitorial, there’s a ton of turnover. It was the same story with what we were doing, there was a ton of turnover, even with us way overpaying and, in my estimation, treating people better than you’d find at most other companies. It was still a real challenge. When COVID hit in March of 2020, everything just escalated. We went from getting like 50 applications a week to being lucky to get one job application a week because people were getting all of these unemployment benefits and the government was basically handing out cash at that point. It was remarkable how dramatic the difference was in the job applications that we were getting. Towards the end it was very, very challenging to staff what we needed to staff. From what I hear, that’s reverted back to the way it was pre-COVID at this point, but there for a while it was really challenging.

 

Steven Haug: You started the business with the plan to eventually sell it?

 

John Claybrook: That was something that we always had in mind. The plan was, we knew that who we ended up selling to is very inquisitive, and that’s something that we talked about at the beginning, it just happened a lot faster than we expected it to.

 

Steven Haug: Did COVID effect the speeding up of the sale process?

 

John Claybrook: No, I wouldn’t say it affected it. We would have kept cruising if we hadn’t yet reached like the size goal that we’d set out to be. However, it did make us, orders of magnitude more relieved to have sold the business whenever that happened.

 

Steven Haug: You sold it to a strategic, you mentioned?

 

John Claybrook: Correct.

 

Steven Haug: After the sale, did you take a break at all or did you jump into building Bronco Ventures, basically immediately after?

 

John Claybrook: We got Bronco setup, me and Brian, one of my partners, Lord willing I’ll work with him for the rest of my life. I knew that a week into to working with him at the trash business and getting that deal started. I love him to death. He’s one of my best friends, and, till death do us part. We knew that we were going to stick together. We thought it’d be a good idea if had somebody who was actually smart. We found Jordan Needham, who’s one of our very, very close friends. He’s long had a fascination with operating businesses. He actually knew how to work Excel, how to turn on a computer, and that kind of stuff. We thought you know, it would probably be smart to have somebody who actually has a decent IQ on this team. He joined us and we got that set up not long after we sold the trash business, but that was really kind of it. I wasn’t busting it, I was resting. We had a series of children there in a pretty short time frame. I was worn out from selling the business, we’ve moved cities. COVID was hard on us with having little ones and a pregnant wife. I rested. I napped every day for a lot of months just to get healthy again from a physical standpoint, emotional, spiritual. I’d let a lot go by the wayside in the mad rush of building this trash business. It was really, really good for me to rest and be restored so that I could jump head first into what we’re doing at Bronco and buy, and build some great businesses.

 

Steven Haug: Let’s dive into the story of Bronco in a more detail. Is it the same team from Value Waste Services that you brought over?

 

John Claybrook: It’s Brian, who was my partner at the trash business, he’s involved and then Jordan. It’s the three of us. It’s cool getting to work with two of your best friends every day. They’re based in Austin and I’m based here. Brian, if you would asked him five years ago, “What do you want to do with your life?” His answer would have been, “I just want to work with my best friends every day.” His answer hasn’t changed and we’re lucky to be the guys that he chose to work with.

Jordan is just a fascinating, well-read individual. He’s a true intellectual. Having a conversation with him is so fun because you can span topics from physics to history to mathematics to capital markets, and it’s all modern. He has this way of combining various schools of thought into one cohesive conversation. It’s just amazing. Beyond that, he’s just good as gold and hard worker and we’d be in a tough spot without Jordan. He has a particular set of skills that we just don’t have. I’m super thankful to work with them. It’s the three of us and I’m not sure I’d pick anybody else I’d rather work with on God’s green earth. I feel very, very blessed.

 

Steven Haug: That’s good. I think that’s probably 90% of the secret here, building out those great teams. Tell us about the early days of Bronco Ventures, building out the playbook, your investment thesis. Then, of course, I want to hear about the businesses you have acquired.

 

John Claybrook: Of course. Everybody has a thesis on how they want things to go when they get started. Then rubber meets the road and you have to make decisions and you hold off and wait for something so that your thesis can be 100% fulfilled, or you change course a little. That’s what we faced. The thesis originally was let’s buy profitable, enduring, blue collar businesses and put, what we call a five star leader in charge, and let’s run with it. It really wasn’t much more complicated than that. We feel like we’ve been surrounded with these outstanding leaders over the past 10-15 years of our lives, and we want to work with those types of people. That was the thought, let’s buy some of these businesses, let’s put one of our five star buddies in charge that we know is a proven, outstanding leader, and let’s support them with the business fundamentals and grow these things.

For like a year we were looking for business and we put in a handful of LOI’s and we just got no deals. It was pretty discouraging. We came across a pest control company right in my backyard. I live in College Station, TX and it was in our backyard, in Bryan. We moved on it very quickly. It was owned by a couple of Aggies who were retiring and we learned about it. A couple of days later we had an LOI signed. That was our first deal. It was really too small to hire an operator or to at least be able to attract an operator of high skill to run it, so I ended up running it. I’m glad I have because I got to see what it looks like to actually undergo a business transformation. We went from all-paper business to an all-digital business. It was kind of like Business School 101 or what search funders dream of. It was the really, old fashioned business that you can modernize. I got to jump in and do that and it was hard, awesome, and fun. Today the business is a lot better than it was a year and a half ago. We got into the pest control space. I’m super happy we ended up in the pest control space. We bought two other pest control companies since then and we’re eager to buy a whole lot more pest control companies.

We’re also in the septic service space in South Texas. We bought a company called Aerobic Services of South Texas. It’s one of the largest septic service companies in that part of Texas. They do inspections, installs, and repairs. One of the cool parts about the septic business is when you have a septic system put in by law you have to have it inspected three times a year for the first couple of years. We ended up with a lot of these service contracts which, in the world that we live in, service contracts are like the most beautiful word that you can hear. We got a lot of those. In that situation, the guy who’s running the company, a guy called Tom Hampton, he stuck on. He rolled some equity over into what we were doing, and stayed on. He just wanted to be able to focus on sales. Man, that guy can sell some septic systems. He’s good at selling the big commercial jobs. Brian’s running that one right now. The point of me saying all that, is it’s another very similar situation, all-paper to all-digital. I’m running like five-six months ahead of Brian, on this. It’s fun for me to encounter some sort of challenge, then Brian encounters the same challenge four or five months later. It’s really cool how we’ve been able to multiply our knowledge so far.

 

Steven Haug: Whenever you’re approaching these business owners about buying their businesses, do you come across any hesitation from these folks about selling to a private equity firm?

 

John Claybrook: Yes. There’s certainly a stigma. I’ll use pest control as an example. There’s are a lot of Mom and Pop shops around town and there is a stigma about selling to private equity. The stigma is that everyone will get fired and they’re just going to try to maximize profit as much as possible. I think, when you go and meet and are actually, at least in our case, share our heart, which is that we are just unabashedly employee first. We feel it is our life’s mission to build vibrant companies that serve employees. That’s why I come to work every single day. I’m here to serve the people who make this business work. I think, you know, when we’re actually able to share our hearts with these business owners, they might realize that not all private equity groups are the same. Hopefully, in our instance, they realize, “these people I’ve worked with all these years, they will be well served by choosing these guys to sell the company to.” We really try to honor the legacy of the people that that we’ve bought companies from by really taking care of their people and hopefully treating them better than they’ve ever been treated before in a work situation.

 

Steven Haug: That’s great. I know that Bronco has a reputation for generating value and helping these companies grow. All the employees certainly benefit from that, as well.

 

John Claybrook: Yes.

 

Steven Haug: Before we wrap up here, John, is there anything else you’d like to leave our audience with?

 

John Claybrook: I was thinking recently, this is something I was thinking about over the break. I think if you were to take a poll of 100 random people and you ask them two questions. If you said, “Hey, on a scale of 1 to 10, one being not at all, 10 being very much so,” how happy are you with your life?” You ask them that question. The second question you ask them is, “How happy are you at your job?” I think there would be a high degree of correlation between those two things. I think as private equity professionals, as managers, we have a real, not only obligation, but opportunity, to create vibrancy in people’s lives and to serve them and love them.  I think, when people are really treated well at their work, when they’re given opportunities to thrive, and make the most of who God made them, I think they’re better when they go back home to their family, and to their communities. I think that where somebody works is one of the most influential institutions of their lives. I’m honored to have the opportunity to work with a lot of awesome people and hopefully serve them in a way that they deserve.

 

Steven Haug: Thanks for that, John. That’s great advice. Work is probably where we spend most of our time besides home. It’s often what we’re thinking about, even when we step outside the door. I think you’re right on those points and appreciate the thoughts on that. John, I really appreciate you joining us here on Not So Private Equity. It’s always a pleasure to chat with you. I’m glad we could catch up.

 

John Claybrook: Yes, Sir. Thank you very much for having me.

 

 

Connect with John on LinkedIn and visit bronco.ventures for more information.

 

 

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