Justin Ishbia is the Founding Partner of Shore Capital. We cover the repeatable system he has built for acquisitions, how to construct successful boards and incentive structures, and why microcaps are the last inefficient component of private markets.
Principles & Lessons:
1) Structured Processes Can Unlock Microcap Potential Justin explains that, “To create enterprise value is a system, no one prejudices the star.” By mapping out every phase, from “idea generation to a hundred-day plan,” he believes that a disciplined approach can unleash success for small businesses. He notes they use “hundreds of steps” broken into innings or quarters, and each step becomes codified. This structure lets teams with less experience manage deals and operations at scale, contributing to over 600 acquisitions in the last three years.
2) Tiny Acquisitions Provide Flexibility and High Returns Justin points to the inefficiency of the “microcap” space, calling it “the last inefficient part of the private market ecosystem.” He says their average transaction is only $12 million, but collectively, they have deployed $7 billion. Under his approach, the initial outlay may be small—“If the first one is wrong, it isn’t a death blow”—yet the resulting multiple can be large because of operational improvements, add-ons, and multiple expansion.
3) Recruiting Deeply Experienced Boards is Crucial He advocates “building boards like a basketball team,” carefully combining different skill sets so there is “a point guard, a power forward, and a center.” Justin recruits board members who have managed similar scale or complementary perspectives, stating that “we often put 7 people on the board for an EBITDA of 3 or 4,” and they receive equity rather than cash compensation. Justin sees that as key to bringing domain expertise into a small firm: “Board members bring 10% knowledge from day one that the first-time CEO would need 5 years to learn.”
4) Under-Leveraging and Shared Upside Drive Sustainable Partnerships Justin identifies a “roll-up” or “levered buyout” stigma, but clarifies that Shore usually under-levers deals at “2x” so that there is no unhealthy pressure on management. He shares more equity with founders—“we used to do 80-20, now we do 60-40”—ensuring they can be “a partner, not just a seller.” He believes these choices raise success odds by fostering trust and leaving room for major capital improvements.
5) Establishing Centralized “Centers of Excellence” Accelerates Growth Justin describes a dedicated operational team—“a marketing center of excellence, a center of excellence for HR, data, technology”—that trains and advises each new acquisition. He says, “Lift and shift” is the strategy, taking proven methods from one small company and applying them to the next. Adam Werder, for example, helps marketing heads from 40+ portfolio firms share best practices so the firm collectively scales faster.
6) Hiring First-Time CEOs and CFOs, Then Surrounding Them With Mentors Justin notes “over 80% of our CEOs are first-time CEOs,” which he calls “early career energy.” Shore pairs them with a carefully assembled board—“they have that last 10% from day one”—so the CEOs can learn rapidly. He created a “CXR program” to hire MBAs as chiefs of staff at portfolio companies. After “4 or 5 years,” these people may step up as full CEOs, lessening dependence on an external search.
7) An Organizational Culture That Prioritizes Friendship and Long-Term Tenure While many firms suffer turnover, Justin stresses building “an environment where they become friends,” citing that “nobody above an associate level has ever left Shore.” He invests in dinners, celebrations, and he emphasizes that “people don’t quit their friends.” At senior levels, “if I make someone vice president, I want them here for a career,” creating stability for portfolio companies and sellers.
8) Adapting the Same Playbook Across Industries Although Shore started in healthcare, Justin applies the same “system is the star” mindset in fields like business services, industrials, and real estate. He says, “I only add a new product if we have an unfair advantage…that helps my base business.” Real estate, for example, arose from “sale leaseback deals that slow things down,” prompting him to launch a real estate fund to “elongate the lease and create a win-win.” By building consistent processes for new verticals, he extends the same methodical approach that has delivered strong outcomes elsewhere.
Transcript