Podcast Summary: Justin Ishbia - Lessons from Acquiring 586 Companies
Podcast: Invest Like the Best with Patrick O'Shaughnessy
Episode Date: September 2, 2025
Overview
In this episode, Patrick O’Shaughnessy interviews Justin Ishbia, the founder of Shore Capital, a private equity firm specializing in microcap businesses. With nearly 600 acquisitions and $7 billion deployed at an average deal size of $12 million, Shore Capital has pioneered highly systematic, process-driven approaches to scaling in the microcap space. Their playbook encompasses rigorous operating procedures, a unique board construction philosophy, and a strong focus on talent development and operational leverage. Ishbia shares insights on building systems, talent pipelines, and the hidden advantages of the “Main Street, not Wall Street” mentality.
Key Discussion Points & Insights
1. The “System is the Star”: Building a Process-Driven Firm
[05:01–09:00]
- Ishbia believes that consistent, repeatable systems—not individuals—drive sustainable superior outcomes.
- Shore codifies every step, from thesis generation, due diligence, to onboarding, and operation (e.g., "nine innings of baseball" for deal processes, "four quarters" for closing).
- Quote: "Our system is our star. No one person makes this place go, and we have to say, more stars into our system, the brighter the system burns." — Justin Ishbia [08:00]
2. Origins: Pre-Fund Hustle and Microcap Focus
[09:01–14:39]
- Shore began as a group of young associates investing thematically in overlooked, small healthcare businesses.
- Pre-fund days were crucial to learning, discipline, and establishing a track record in tough market conditions (e.g., during recessions).
- Quote: "When it's a good time to fundraise, it's a bad time to invest, and vice versa." — Mentor advice, recounted by Justin Ishbia [11:03]
- Focus is on backing technical experts who lack business infrastructure, then adding processes: “Flash and a dash, a dashboard and a flash.”
3. The Canonical Deal: What Shore Looks For
[14:39–18:24]
- Seek platform businesses with ~$19M revenue, $3.5M EBITDA, bought at ~7.5x EBITDA with modest leverage.
- Ideal sectors have long-term growth, consolidation opportunity, and where there’s much more demand than supply (e.g., veterinary businesses).
- Quote: "We love investing in industries where there's much more demand than there is supply. Try and become the supplier of choice." — Justin Ishbia [15:50]
- Margin for error is increased by deploying more capital on add-ons relative to platform.
4. Performance, Returns, and the Firm’s Moat
[18:24–20:45]
- Shore’s historical performance: average 7x gross cash-on-cash, 72% IRR on 14 exits. Median 5.5x, 50s IRRs.
- The key moat is deal and human capital volume, supported by operational excellence and systematized knowledge transfer via boards and a strong network.
- "Return on invested capital can persist if you build a proper moat... Our moat is the volume, the number of transactions that we do." — Justin Ishbia [20:45]
5. Board Construction as a Competitive Edge
[24:03–30:10]
- Boards intentionally built for each investment—like sports teams, not just investors but seasoned operators and sector experts.
- Only lead director is paid; others are compensated in equity options, incentivizing outcomes over cash.
- Frequent cross-pollination via summits builds an ecosystem effect.
- Quote: “We build a board like a basketball team. I don’t want five point guards… we find the Mount Rushmore of that industry.” — Justin Ishbia [24:37]
6. Sector Selection: Why Not Software?
[30:10–33:12]
- Focus is on sectors (like healthcare, industrials) where technical leaders lack business acumen but possess “outsized technical skill.”
- Enables partnership model: experts do what they love; Shore does the rest. Software founders often need less help with business ops.
7. Thematic Thesis Generation and Sector “Roadmaps”
[33:12–39:15]
- Each senior deal professional selects, deeply researches, and “owns” their sector.
- A “roadmap” (white paper) is required for a sector to be greenlighted, including identifying the industry’s “Mount Rushmore.”
- “Why does the small player win here?” is a fundamental question.
- Team-based, peer-reviewed process for theme selection, with individual carry attached to vertical’s success.
8. Deal Diligence and Asset Selection
[39:15–42:36]
- Focus on peer reputation, technical skill, curiosity, and willingness to partner and grow.
- Management teams are reshaped post-acquisition; best founders recruited into key roles, but not always as CEO.
- Quote: "Reputation amongst your peers in the industry... if your mom had to have a cataract surgery and she could not go to your practice, who would you send her to in town?" — Justin Ishbia [39:52]
9. Roll-Up Risks, Negotiation, and Legal Simplicity
[42:36–48:30]
- Roll-ups get a bad name, but Shore minimizes risk by under-levering and building robust tech and advisory boards.
- Negotiation is more psychology and sales than pure finance; zero lawsuits out of nearly 900 deals.
- Shore automates negotiation with a “green-yellow-red” term sheet protocol for all key contract provisions.
- Quote: "End of the day, I always tell our team members... If we ever pull out that [deal] document in the future, we've already lost." — Justin Ishbia [44:55]
10. Talent, Growth, and Cultural Longevity
[48:30–62:36]
- Biggest risk: not enough “early career energy”—so Shore grows its own talent (CXO program), recruits out of top MBAs/accounting, and offers career advancement across verticals.
- Extreme retention—no one above associate level has ever left.
- Systematic culture: social events, pay above market, long autonomy but high expectations.
- Quote: "People don't quit their friends. My job is to create an environment where they come friends with each other." — Justin Ishbia [59:59]
11. Innovation Stacking & New Product Verticals
[51:00–54:02]
- Only adds a new vertical if: (a) firm has an "unfair advantage" and (b) it helps the base business.
- E.g., real estate arm grew out of specific industry needs (veterinary leaseholds).
12. Exits, Platform-Building, & the Buyer Universe
[54:02–56:59]
- Selling to strategics, large PEs; never can predict the ultimate buyer.
- "We are building platforms, not buying platforms," often recruiting and building management teams from scratch.
13. Operational Leverage & Knowledge Sharing
[57:17–59:40]
- Portfolio Performance Group/Centers of Excellence: functional leaders (marketing, tech, HR, etc.) support cohort learning and “lift and shift” best practices across the portfolio.
- “We have billion dollar company resources applying to million dollar companies.” — Justin Ishbia [57:59]
14. Sports Ownership: Philosophy and Surprises
[62:36–67:20]
- Justin and his brother now own the Phoenix Suns. He views the team as a community asset, not a trophy, and applies the same system/feedback philosophy as in PE.
- The biggest surprise: the NBA is a more collaborative partnership than expected.
15. Benchmarking & Continual Improvement
[67:20–69:19]
- Ishbia actively benchmarks outside his own firm: Sequoia, Donaher, Mark Leonard (Constellation), mentors, Harvard Business School faculty.
- The system is never “complete”; constant quest to improve onboarding, error-prevention, and knowledge sharing.
16. Personal Reflections
[71:14–74:42]
- Misses hands-on dealmaking as the firm has scaled.
- Best personal advice received: “Try and have one friend in each decade of life.”
- Quote: "I was fortunate to have lots of mentors... but one actual piece of advice: try and have one friend in each decade of life." — Justin Ishbia [73:21]
Notable Quotes & Moments
- “Our system is our star. No one person makes this place go.” — Justin Ishbia [08:00]
- "Good medicine is good business." [12:17] — Justin Ishbia, on the link between technical/professional excellence and business success.
- "We’ve done now almost 900 transactions. We’ve had zero lawsuits." — Justin Ishbia [44:54], on the power of trust and process in negotiation.
- "People don't quit their friends. My job is create an environment where they come friends with each other." — Justin Ishbia [59:59]
- "You know who owns the [basketball] team? The fans, the X million people who live in Phoenix." — Justin Ishbia [62:52]
- On career advice: "Try and have one friend in each decade of life." — Justin Ishbia [73:21]
Key Timestamps
| Time | Segment Description | |-----------|---------------------------------------------------------------------------| | 05:01 | "System is the Star": Shore’s process-driven philosophy | | 09:01 | Origins: Early days, raising pre-fund capital, thematic focus | | 15:05 | The ideal Shore Capital microcap deal, industry thematics | | 18:24 | Historical return profile and IRRs | | 20:45 | Operational moat and talent systems | | 24:03 | Board construction and unique approach | | 33:33 | Thematic thesis generation and roadmap process | | 39:43 | Diligence and what matters when buying companies | | 44:54 | Negotiation philosophy and managing downside | | 48:30 | Addressing talent and CEO pipeline risks | | 57:17 | Centers of Excellence and operational leverage | | 62:36 | Sports ownership: lessons, surprises, and philosophy | | 67:20 | Benchmarking: Influences, mentors, aspiration for Donaher consistency | | 73:19 | The kindest advice and value of intergenerational friendships |
Conclusion
This episode provides a masterclass in systematized private equity investing in overlooked, high-potential business niches. Ishbia’s approach centers around codification, relentless process improvement, people-first cultures, and leveraging operational excellence—delivering a powerful antidote to the often personality-driven myths of traditional PE. For investors, operators, and strategists alike, Shore Capital’s “factory of company-building” offers a compelling model for scalable value creation.
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