Admired, copied, misunderstood: the incredible story of Teamshares

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Disclaimer: Views expressed here are the author's based on public sources and are intended for informational purposes only. This is not financial advice. Please consult a professional for investment decisions.

By and large, VCs and programmatic acquirers of small businesses (SMBs) do not mix. “Boring” industries. Lack of alignment around growth, risk and return profiles.     

There are, however, 3 important exceptions:

1. Software

2. Ecommerce brands (hi there Amazon FBA rollups!) 

3. Teamshares 

We have written extensively about the first 2 topics. Notwithstanding the steady trickle of bad news from the ecomm brand world, VC interest in SaaS rollups shows no sign of abating, as evidenced from their investments into Unaric (LocalGlobe), Aries (CherryVC) or Shop Circle (645, QED, NFX).   

On the other hand, “brick and mortar” SMB acquisitions have been the preserve of search funds or lower mid market private equity. Not any more. Enter Teamshares: a VC backed acquirer of small businesses from retiring owners. What Teamshares has achieved in its 5-year history is nothing short of revolutionary: it has opened up an asset class to the deal flow hungry US venture industry. 

But - as we explain - there’s more than meets the eye.   

Teamshares positions itself as a SaaS / fintech play with a niche go to market strategy. Its customer acquisition strategy is, quite literally, customer acquisition.  

As Teamshares put it in their investor presentation: “We buy 15 year cash flow annuities to fund a lucrative fintech platform”. 

The concept of substituting third-party providers with in-house solutions is not new. For years, Aquiline backed software rollups ClearCourse and Fullsteam have been in-sourcing payment solutions in transaction-heavy VMS like sports membership management and event ticketing. 

What is different about Teamshares is a) the scale of ambition and b) the concept of broad-based employee ownership.

Since being founded in 2019, Teamshares has acquired 90 businesses all over the US. Car repair shops like Brad's (pictured below) in Western Massachusetts. Or Custom Fireside, a Californian retailer and installer of fireplaces, inserts, stoves, and mantels.

It is a long way to go towards the 10,000 portfolio company target. However, with 4.5M American SMBs seeking succession in the next decade the TAM is undeniably massive. 

Still, to put this into context, at the 10,000 market Teamshares would have $50B in revenue - far ahead of fellow compounders like Constellation, Danaher and Roper: 

Here is the kicker: each portfolio company is to be “80% employee-owned within 20 years”. 

Teamshares is well capitalised to achieve this objective, with several hundred million in debt and equity raised from the likes of i80, Sound Point, Khosla Ventures, QED and Union Square Ventures. Even the Japanese financial conglomerates MUFG and Nomura have bought stakes!

In this article, we explain:  

1. What sort of businesses Teamshares acquires

2. How Teamshares structures deals - and why its ownership transfer offer is less generous than it seems

3. Value add beyond financial engineering

4. Most importantly, does Teamshares have a scalable proposition?

5. Bonus: parallels with the British pub industry

Let’s dive in!

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What sort of businesses Teamshares acquires 

Teamshares has a clear preference for broker-led processes to ensure consistency in its target of closing deals within 90 days (from the date the LOI is signed).

Industry-wise, it skews towards service businesses with stable, if not necessarily recurring revenue streams:

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