What I'm thinking about for the rest of 2025

This is another "journal in public" newsletter where I use this space to think out loud and get your input.

Four years ago, I started Gateway X, and the idea was venture studio meets HoldCo: build profitable, cash flow businesses from scratch and own them. 

Build one per year and hope for a solid hit rate, to build a portfolio.

And, all things considered, it's gone pretty well! We have four different profitable businesses, each in different stages and with their own opportunities and challenges.

As I look forward, though, I'm feeling a desire to do things differently.

My goal has always been to build some kind of unique HoldCo. (Check out this presentation I made in 2009!!)

But, as Ric Elias taught me, "What got us here won't get us there." I explored some options in a previous email. 

Today, I want to explore the thesis of buying businesses going forward, versus starting them.

First off, let's acknowledge that buying versus building are VERY different.

Building has a lot of benefits:

• You choose the idea

• You choose all the people, processes and approach

• It is VERY LOW CAPITAL risk (it costs little to get started and see if it works)

It also has some drawbacks:

• It starts slow from a scale standpoint

• New businesses are much more messy and volatile

• It has a VERY high TIME risk (I can spend a lot of personal time and energy on something that never works. See Unbloat)

Buying is the opposite of the above. 

The "dream," of course, is to buy something small-ish but established enough (consistent profits, strong offering, stable team) and super-charge it with entrepreneurial energy to experience higher confidence and lower (time) risk growth.

What do I need to really get right to make building work?

I wouldn't call myself an investor, but I do have some experience. I spent a few years at Goldman Sachs, investing in companies, and at Ampush, I acquired two companies.

At Goldman, I was a public markets investor (stock-picker), so there was no control, but there were three major lessons and a bonus lesson I took away.

In fact, I blogged about this back in 2011.

Let’s recap and break down some of the lessons.

The three lessons I learned for when to buy a stock:

1. You have a differentiated perspective on the future earnings of the business, meaning you see a way the company will grow profits bigger and faster than the rest of the street

2. The company is valued fairly (more on that below) or below comps

3. There are strong market tailwinds/trends driving growth for the company

(Applied to numbers 1 and 3) Often, people undervalue what Albert Einstein called the "8th wonder of the world:” compounding. So time and growth are really your friend.

At Ampush, we bought two companies and gained a lot of lessons by studying Warren Buffett to make those decisions.

We bought Academic Earth (AE) and MySubscriptionAddiction.com (MSA). (MSA was never announced because we didn't want to spook the community).

He often uses the classic analogy of a castle (the business) with a big moat (defensible advantages).

Both AE and MSA had EBITDA margins > 50% (high margins are a classic sign of moats). How, you ask? They both had strong SEO traffic footprints with millions of monthly users due to high-quality content. 

SEO has long been one of the most sustainable marketing channels, and most profitable.

The idea here is to pay something that assumes you will screw the business up, and the math still can work on your ROI.

One of the most famous Buffett stories is about a young man who asked him, "How do you buy businesses with a single-page contract and no due diligence?"

Buffett’s response, "Price is my diligence."

What he means is that he pays a low enough price to account for potential issues in the business.

This is a tough one for entrepreneurs because we tend to be optimists. But you NEVER want to pay for a business based on your "optimistic case" — you want to buy it based on your worst case.

Academic Earth cost:

To acquire AE, we paid zero. Scratch that — we paid $10,000 in legal fees.

We received 70% of the business, and the original owners kept 30%.

We soft-promised to invest resources in growing it! (And we delivered! Eighteen months after buying it, we sold it for $2.5M.)

MySubscriptionAddiction’s cost:

MSA was generating >$1.5M in profit. We paid <$7M for it, of which we borrowed $5M, and $1M we were able to save in taxes, so our cashout was $1M!

And, in both cases, but especially MSA, we really needed that margin! We made some huge mistakes.

We tried to rebuild the team with Ampush people, which didn't work. Then, we tried integrating the founders, which didn't work.

Still, the business produced >$1.5M per year for the first two years.

Then, we hired an entire new CEO and team. Profits declined, but were still there!

Ultimately, my former co-founder and BFF, Nick Shah, bought it from Ampush (when we sold the whole company to Tinuiti).

Nick shifted the entire strategy and 10x’d the valuation he paid!!

Ampush made a little money on the deal. Nick will make a lot.

But a good price is key.

This one we kind of did — halfway — because all the businesses were customer acquisition/lead gen, and that helped. 

But the other half was that both businesses were SEO-driven, and we knew nothing about SEO and never built that competency.

Another important Buffett and Goldman lesson is to bet on great leaders/management. I think we did OK on this, but I want to include it for completeness.

So, what do I need to shift GX from studio to HoldCo?

(Assuming capital isn't a problem, which I believe is another advantage I have.)

I don't think just buying businesses willy-nilly is a great idea. There are thousands for sale across every vertical and industry. The best HoldCos have a clear and distinct POV.

An example is my friend John Burke at Merit Holdings. He looks for software companies that power niche services where consumer demand is "irrationally" high/price insensitive. HUH? WTF does that mean, Jesse?

Two examples: He owns a software that is used by equine veterinarians! He owns another one used by locksmiths.

He starts with the end consumer (people who own horses or people locked out of their houses). Both, irrationally, have an expensive demand. 

Then, he finds service providers. THEN he finds the software they use.

THAT is a killer thesis.

So what's mine? I don't know!

Give me some ideas. Hit reply and tell me.

I like John’s, and maybe I could apply it to marketing services (since that's in my circle of competence).

For example, a marketing agency for vets? It doesn't feel quite like I've nailed it, but I want to spend time thinking on this.

One core issue for me is that most marketing services businesses aren't GREAT businesses. They are nice to build, but not sure I love them to buy.

Software/SaaS is better for a lot of reasons. Or even staffing, like GrowthAssistant, because both have much better retention.

Part of where I want to spend time is on a compelling "DFS" (Desired Future State) or vision of what I'm running towards!

I tell myself this will be easy because it’s like "marketing and sales" for company buying.

I have a public platform and know how to do outbound (mutual intros and networking).

But the truth is, I've never built an engine like this, so who knows! I can learn a lot here. 

I bet we could build some cool AI tools to look at third-party data, scrape websites and LinkedIn to build a unique advantage here.

Deal flow is so important because it’s the only way you find great deals.

Both MSA and AE came through proprietary relationships where we had built-in trust. I think you want to look at 100+ deals before you do something.

Another great Warren Buffett quote: "Business buying is like playing baseball with no called strikes."

If that was how baseball worked, hitters would wait for the PERFECT pitch before swinging — and I think that's the mindset to cultivate.

A big part of this thesis relies on some of the unfair advantages I've either built or proven out over the last four years. I think it will be important to make them more robust and less ad hoc.

My advantages:

1. Distribution advantages

   The two primary sources of this are:

   A) My social and newsletter followings

   Time to improve my content and add more value to grow both scale and engagement

   B) My network

   Cultivating both knowledge out of it and value add to it

2. Talent access

   This relates to number one, but is a separate and, arguably, the most important competency. Sourcing top talent to work inside and build these companies.

3. Business playbooks

   Especially for tech-enabled marketing services. There are a bunch of problems I've solved already: team staffing; hiring systems; biz ops and analytics. Knowing what great looks like here and implementing it.

4. Other 

   A bunch exist here. One big one is using the power of AI (which is a whole new lever) to transform businesses. I think this must be core to any thesis. There's also knowledge of paid growth and organic social.

So there you have it — my “journal in public!” I will continue to work through these items as I learn and we watch our AI projects take shape. 

Ultimately, at some point, I'll have to decide to JUMP IN and do a couple of deals. The real learnings will come then.

Stay tuned, and let me know if you have a great idea for me.

jesse

PS Really. Hit reply and tell me what you think of these approaches, or of businesses I should buy. Unlike other email I get, I won't respond quickly to these. I'll spend some time thinking about everything you say.