What is Teamshares?
We are a venture capital backed financial tech firm that does things a little differently. We call what we do: “participatory capitalism”. It’s really very simple. We buy small businesses from retiring owners, typically baby boomers who are ready to retire and then fund the selling of the businesses to the employees. Capitalism isn’t working and it needs reimagining. Teamshares is part of the solution by helping employees win alongside investors.
Our employee-owners earn 5-6 figure stakes in their employers and we’ve seen that change lives. We’re excited to make employee ownership easy for small business and at the same time, create great investment returns for our investors.
Since the formation of Teamshares Inc., what type of venture capital have you attracted?
Our VCs have funded game-changing companies including Allbirds, Blue Bottle, Carta, Etsy, Indeed, Kickstarter, Lyft, Opendoor, Slack, Sweetgreen, Twitter, Reddit, and Twilio. They have provided $11 million in venture funding to date and since we run fairly lean, with eight full time and two part time employees, we can make sure the capital is focused on making employee ownership the future of small business.
This is really important now because coronavirus has demolished huge swaths of the small business economy. There’s an opportunity to do well financially by doing good for the economy by helping stabilize these key local employers.
How is this different from private equity?
As mentioned earlier, Teamshares is a financial tech firm that is building its own software to underwrite the employee buyout transaction as well as support the operations, employee ownership program, financial education and more. We have a network and as we acquire companies, we add them on a permanent basis rather than keep them for four or five years and then kick them out to sea in a raft, so to speak. This is all very different than private equity. Our team has completed three Teamshares Buyouts and another eight similar acquisitions previously.
What was the problem you were trying to solve for small business owners trying to sell their firms when you, Alex and Kevin started Teamshares?
We thought the main problem to solve was that business brokers were ineffective and that was the reason that many small businesses don’t sell. We thought business brokers weren’t running the competitive sale processes that investment banks do for bigger companies. Though partially true, we later realized the real problem is demand; there aren’t enough buyers for the supply of small businesses for sale. We asked ourselves, if the business is viable with a stable workforce but the constraint is the market, how do we increase the supply of buyers? The solution was there all along, sell to the employees as they have the most interest in having the business continue. They just haven’t had the capital or know-how to buy the businesses. They were also understandably fearful of an all-in financial risk, such as having to borrow to buy a business. This way, following the Teamshares approach, employees don’t have to borrow and they take much less risk.
What is the biggest societal problem you are trying to solve through Teamshares?
Way too many small businesses close when there are no buyers and no one from the founders’ families wants to take over the businesses. When these businesses close, all of the employees lose their jobs. Especially with the recession brought on by the coronavirus, these business closures and the resulting job losses are a huge societal problem.
Why do you think Teamshares has been successful?
To be clear, we are really, really early, but we have been very deliberate about our model which has found some early customer success. We have very tight parameters in what we look for in a transaction. This has worked well for us. Primarily we look for businesses that were founded 20 or 30 years ago and that have one or two owners looking to retire. We particularly like blue collar and white collar service businesses that are recession-resistant. These aren’t sexy tech businesses but ones that are always needed and grow revenue year after year. Businesses like: HVAC, plumbing, electrical repair and maintenance architecture, engineering, accounting, and IT support. We want to see long tenured employees and low turnover with two or more managers preferably one that is capable of running the firm if not already doing so. With these parameters we know that the business can be a great deal for all involved including the employees.
We have also hit the market at exactly the right time, given the two problems we discussed a minute ago: one, that there are many retiring owners who don’t have many buyers for their companies, and two, that when companies are liquidated, everyone loses their job.
What gives you confidence that employee ownership makes a difference?
The National Center for Employee Ownership surveys show that ESOP firms grow 2 to 3% faster per year and are 14% more profitable than firms not owned by employee. Our own experiences show this to be true.
So what is Teamshares doing now?
We’re gearing up for our next round of Teamshares Buyouts. In the meantime, we’re working on building more software, processes, and improving our customer experience. We have a lot left to do.
The above information about Teamshares was taken from an interview that John Hoffmire, Chairman of the Center on Business and Poverty had with Michael Brown, Co-founder and CEO of Teamshares.
Teamshare Companies (click on Company name to learn more):
- Commercial Refrigeration of Harrisburg (Pennsylvania)
- PlanForce (Minnesota)
- Nationwide Refrigeration (Virginia)
Interested in selling your small business?