Brent Beshore Returns – Private Equity, Venture Capital, and the Future of Money Management

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
Two weeks ago, I spent the day in St. Louis with Brent Beshore, who was a guest on the show in the fall and has become a good friend. We talked for about 10 hours straight about all things investing in business and decided to record a two-hour chunk. Early on, we discussed private equity, venture capital, and the importance of brand. Brent's perspective on these different topics is unique because of his experience with so many small companies. We then explore the differences between public and private company valuation and the potent idea of peer mentorship. We wrap up with Brent's recent experience with one of the greatest investors and thinkers of all time. Above all, this is a conversation about what is right and what is wrong in the world of money management and investing and where the business is headed. If this conversation is half as fun to listen to as it was to have in person, you're in for a real treat. You can find show notes at investorfieldguide.com forward slash adventures and now please enjoy my conversation with Brent Beshore.
So let's talk about, let's approach the entire kind of investable universe. Where we started the first time was your, what I thought was a little corner of the world and now realizing where all the actual companies are.
So your 2016 letter was interesting where you got adventures looked at or saw 2,500 businesses, diligence on a little bit more than 300 So maybe we could start with the entire universe size. So 2,500 is a slice.

**Brent Beshore** (2:49)
Tiny slice.

**Patrick O'Shaughnessy** (2:50)
Of your overall universe. So maybe paint that picture of how big is the private company market and kind of what are some key features of it?

**Brent Beshore** (2:58)
Yeah. So it's actually hard to know.
I did a tweet storm, I think, on this the other day and I'm always getting this question, right?
So a lot of people are like, oh, yes, sir, how many businesses could there be out there to buy? And if you look at like tax returns, right? So there's like 33 million business tax returns in the United States. Some of those are duplicate locations and some of those are shell entities.
In terms of the actual number of companies in the United States, it's in like the low 20 millions, I think. So now a lot of those are like one man, two man bands. When you start getting up into what I would call investable businesses or having enough heft to transfer, like there's some sort of asset there to be transferred. I'd say you're talking about somewhere between 500,000 and 800,000 entities that are out there that contain transferable assets to the type that we would really look at them. You know, in kind of metrics around, you know, five plus million dollars of revenue.
And that depends on the business, right? So you can have a five million dollar business that has almost no cost structure attached to it. And it's all gross profit. Or you can have a five million dollar company that has one hundred and fifty thousand dollars of gross profit, right? The profit margins then. So you've got to kind of you know, there's a lot of nuances to the size. But if you look at kind of that intersection of five million plus dollars in revenue, maybe thirty plus employees kind of in that sphere, you're looking in that kind of five hundred to eight hundred thousand business range. I mean, it's that's for us, that's kind of the investable universe as we think about it.