Learn what a search fund is and how Neal is shopping for a company to purchase. To learn more about The Hill Growth Fund click here.
Mark: Hey, folks let’s learn something new about the oil and gas industry.
Hi. Today, we’re in downtown Houston with Neal Wendt.
How are you doing, Neal?
Neal: Pretty good.
Mark: Yeah. And in case you can’t tell, it’s actually cold in Houston. It’s 49 degrees which the rest of the country would think is a spring day, but it’s cold here.
So, Neal you’ve got a fascinating story, right? You do something I have never heard of before. It’s a search fund, is that correct?
Neal: Yeah, that’s right. So, the search fund model is actually fairly young in terms of the business model, but it’s started about back in 1984 by the Stanford GSB, the Stanford Business School. And really, two main schools are Stanford and Harvard and they really been cultivating it. Today, there’s only been about two hundred and twenty, two hundred forty search funds that have been started overall throughout the history of the business.
So, it’s actually really unique model in that there’s two rounds of funding. The initial round is the support for the search. So, over the next eighteen to twenty four months I’m going to be searching for a good business to buy. So, what I’m doing right now in the initial search is I’m going around some potential investors and saying, “Look, support me for the next two years. I’m going to find a good business to buy, then I’m going to come back for a second round of funding significantly larger, but we’re going to purchase that business and then, I’m going to run the business for the next five, seven, ten years.”
So, it’s a little bit different than a private equity, in a standard private equity play, right? Because this is more of a long term focus, this is a firm of one, right? I want to buy one company, I want to buy a good company, and then I want to run it over the long term.
Mark: Yeah. And the thing I think is really cool, so the search funding is unique and there’s not a lot of people doing it, buy you’re even niching it more, right? You’re focused on oil and gas?
Neal: Yeah. Well, ideally I want to base on my experiences, so I spent the last two-and-a-half years – a little bit background on me. Born and raised in Austin, Texas. Played football in the Air Force Academy, blow up my knee, air force officer for five years and got out. I was a Lean 6 Sigma Black Belt for GE Oil and Gas here in Houston. I love the oil and gas industry, I love Houston, I love Texas, so ideally I would love to be in oil and gas and look for a small to medium-sized business of $10 to $15 million in revenue, right? Within the oil and gas sphere. However, I am not going to limit my investor’s potential on profitable endeavor. So, I’m definitely going to do industrial search within oil and gas, however, you know, a software company in Seattle is just right, but my focus is definitely going to be within oil and gas.
Mark: Yeah. And so, a lot of people have to go, “Well, Neal, oil and gas industry is hurting.” You and I were talking about this off camera. Oil and gas industry is – the entire industry is not hurting, is it?
Neal: No, it is definitely not because when you look downstream, right now, you know, it’s 30% of the standard cost it was two years ago which if you put a 30%, you know, your key component is now 70% cheaper, yeah, your business is going to be booming. And to be honest, even upstream, you know it’s a correction I think we’re all feeling it right now, but, you know, it’s a cyclical environment we know that, Houston as a whole, the industry as a whole, and the energy sector as a whole has really prepared and has learned on past boom and bust.
So, I think this is actually a really good time to be doing something like this because there’s a lot of opportunity, there’s going to be, you know, you got downstream is booming, and upstream, yeah, there might be a few times where that business owner is like, “I just don’t want to go through this again, but I want my legacy to keep one.” And that’s where we – that’s where The Hill Growth Fund, my company that we started, it comes in and says, “We want to take it over and we want to focus on the good business principles that we’ve already established. We want to keep it going.” And this is a long term play. This isn’t eighteen months from now, we sell out, right? This is a long term investment growth.
Mark: So, if anybody out there has a business and they’re interested in getting in touch with you and just talking to you and see if it’s a good fit, where should they go?
Neal: Yeah. So, definitely I’m willing to talk more, you know, have laptop will travel. The company started as The Hill Growth Fund, so you can go to www.thehillgrowthfund.com. It’s a standard website, gives you kind of more information more readings about what the search fund is, a little bit further background on myself and why I am suitable to – why I feel I’m suitable to run the company and take it to that next level. And then, of course it has my contact information.
Really not geographically focused. Again, even in within the oil and gas, oil and gas is a huge industry. It’s very exciting time I think personally. I would love to find something within the oil and gas. Again, I’m not going to limit my investors’ ability to make a profit, but.
Mark: Yeah. So, folks we’ll put a link in the show notes, so you don’t have to write stuff down.
Neal, thank you so much for your time today.
Neal: Yeah. Thanks for your time. I appreciate you coming down. I look forward to finding a good business to buy.
Mark: So, folks I hope this helped. We will see you next time.