“I buy unsexy recurring revenue businesses with high barriers to entry that are a small enough line item so a CEO would never even see it cross their desk.” —AJ Wasserstein

8 years ago AJ was graceful enough to grab lunch with 23 year old me to talk business.

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He has bought, built and sold 2 companies that fit the description above.

First was a document storage company which grew to be the third largest in the US.

They would pickup your business paperwork on a monthly basis, store it in a secure location and shred it when it was no longer needed.

They had long term auto-renew contracts and built the business through acquisitions.

They were eventually acquired by Iron Mountain, the publicly traded kingpin in this space.

Next he started a point of use tankless drinking water company. They leased these units to businesses and set up recurring monthly service and filter changes.

Again he utilized auto renewing contracts and grew by acquiring every mom and pop operating in this space.

They got up to 48,000 deployed units in the US before being acquired by an EU private equity group in 2016.

Let’s run some rough numbers... 48,000 x $30 = $1,440,000 MRR or $17,280,000 annually.

Let’s assume a 50% margin and sale at a 10x multiple. That’s an $86m+ exit.

(FYI I have no idea what they actually sold for.)

Interestingly, neither of these businesses had a real estate component. When acquiring a new company he would prefer the owner keep the real estate and they would stay on as a tenant. They preferred to save their fire power for faster, less capital intensive growth.

P.S. check out AJ’s book, “What Matters Most: A Young Adult’s Roadmap for Life” which was written for his 2 teenage children before they went off to college. https://www.amazon.com/dp/1546466568/ref=cm_sw_r_cp_api_glc_fabc_6T7bGb971A83T

PPS he is currently a professor at the Yale School of Management. Learn more here: https://som.yale.edu/aj-wasserstein 

AJ loves to say “go where the talent is not”.

I think of him whenever @sweatystartup says “go compete against the guy still using a fax machine”.