Podcast: Water Direct: Adam Johnson

From SMEVentures, it’s The Search Fund Podcast, a show about hungry entrepreneurs who, instead of starting a business, decide to buy one. These are their stories of success, failure, and the lessons they’ve learned.

This episode charts the unique path of Adam Johnson, now the CEO of the critical UK infrastructure company, Water Direct. From an entrepreneurial upbringing in Texas to the fast-paced world of Silicon Valley tech sales at companies like WePay and Voxbone, Adam's journey forged a distinct perspective on adaptability and the power of a good story. Tune in to hear about his discovery of the search fund model during his MBA, the unconventional process of finding and acquiring Water Direct by seeing value where others might not, and his vision for evolving a vital logistics business into a digitally-enabled leader in its space. Discover the lessons he’s learned about translating sales skills into leadership, navigating the very real challenges of the CEO role, and the rewards of building a team to execute a new vision.

This transcript is auto-generated, so please forgive any errors.

[00:00:01] Adam Johnson: it was rare, I will say, it's rare that you become infatuated with something like this, but it just made sense to me. And I think it's really lucky; not a lot of people from a career perspective, at least can say that they get a bit obsessed with what they're doing.

[00:00:16] Adam Johnson: And I, I totally felt that with the search.

GLOBAL INTRO

[00:00:21] Jake: From SME Ventures, it's the Search Fund Podcast. A show about hungry entrepreneurs who, instead of starting a business, decide to buy one. These are their stories of success, failure, and the lessons they've learned.

EPISODE INTRO

[00:00:38] Jake Nicholson: Welcome to the Search Fund podcast. Today's conversation with Adam Johnson, CEO of Water Direct, was one I found personally fascinating, and I think you will too, especially if you're intrigued by unconventional paths and finding gold in unexpected places. What really struck me

[00:00:57] Jake Nicholson: about Adam's story is how he navigated such different worlds—from the hustle of Silicon Valley sales, where he learned invaluable lessons about storytelling and adaptability, even feeling a bit embarrassed about being in sales initially, to acquiring and leading a critical UK infrastructure business, dealing with something as fundamental as water.

[00:01:22] Jake Nicholson: He brings such a candid perspective on the challenges of that transition, the weight of leadership, and the sheer grit involved. We get into his journey from a Texas upbringing with an entrepreneurial dad through his time at startups like WePay and Voxbone selling telephone numbers of all things. His discovery of ETA during his MBA and the AHA moment connecting a Texas blizzard to the potential of Water Direct.

[00:01:50] Jake Nicholson: If you've ever wondered how skills from seemingly unrelated fields translate to running a company or how to spot deep value in a business that might not look glamorous on the surface, this episode is packed with insights. Adam's honesty about both his highs and the very real difficulties of the CEO role, particularly the people side, is something I think every aspiring and current operator can learn from.

[00:02:17] Jake Nicholson: Stick around. This is a good one.

[00:02:20] Jake Nicholson: Adam, thank you so much for taking some time to chat with me today. I know you have a really interesting story and I'm excited to get into it.

[00:02:30] Adam Johnson: My pleasure.

[00:02:32] Jake Nicholson: Adam, I'd like to start from the very beginning in these conversations, so we'll do the same with you. Can you tell me a little bit about where you grew up in that environment?

[00:02:43] Adam Johnson: Yeah, sure. I don't know if you listen to this, it's a very UK reference, but there's a UK politics podcast called The Rest is Politics and they always start with that question. So I feel like we're... yeah, it's, um, I grew up in Austin, in Texas. Was born and raised in Austin. My dad was a seventh generation

[00:03:04] Adam Johnson: Texan and my mom was English. So that's two very different styles of, I suppose, culture from both my parents. I grew up in what I would now describe as an Austin that doesn't really exist anymore. So, Austin's sort of been on the map now for the better part of maybe 10, 15 years.

[00:03:21] Adam Johnson: And it's this perpetually growing city of the future, as it were. But when I was growing up there, it was still a little hippie sort of college town. And Willie Nelson was like the biggest thing about the city.

[00:03:33] Jake Nicholson: No South by Southwest at that time.

[00:03:35] Adam Johnson: South by Southwest started in the nineties.

[00:03:37] Jake Nicholson: Oh, it did.

[00:03:38] Adam Johnson: But it was very much still, like when I was growing up, at least in the nineties, it was very clearly a music and film conference. And then tech came, I think, probably in the early two thousands, maybe late nineties, but it was a very different thing.

[00:03:50] Adam Johnson: And then as I got into high school it definitely became a seedling of what it is today. And at that point it was the midst of spring break. And so anybody who lived in Austin got out of there. So South By was like never a part of my world. But anyway, I grew up in Austin and had a great childhood there.

[00:04:07] Jake Nicholson: I've never heard it called "South By." It's spoken like a true local who knows the scene. Yeah.

[00:04:13] Adam Johnson: No, no, not Southwest, just South By.

[00:04:14] Jake Nicholson: Just South By. What were you like as a child? What were some of your earliest interests?

[00:04:20] Adam Johnson: That's a good question. I was the first child. I was, my parents had me when they were about 30. And my parents called me a grandpa when I was a kid. I think I had a pretty steady demeanor. Like super early interests, probably like any kid, we had a Labrador and so I was obsessed with Max the Labrador and all this sort of thing.

[00:04:40] Adam Johnson: But then as I got a bit older, I don't know, I was a pretty social kid. I liked being around people and was very much, if I had a view of the day in elementary school. This is probably the case with most kids, but that's the part of the day that I was definitely looking forward to the most.

[00:04:58] Adam Johnson: But I also loved school. And there were some pretty formative people. I was super lucky. My dad didn't go to college, was an entrepreneur himself. And I think really sort of made his way through the world by sheer sort of force and grit.

[00:05:12] Adam Johnson: But my mom was of the mindset that the kids are going to go to good schools and we're going to do whatever it takes to put them in good schools. So, I was super fortunate to go to some really great schools and I had some really great teachers. And I credit my love for learning and being in school to two or three of my teachers in elementary school.

[00:05:32] Adam Johnson: There's a woman named Marnie Osowski, who was my fifth-grade teacher who I think is still teaching in the school district, like 30 years later. But I just vividly remember it was the first time someone was like, we're going to sit down and talk about like math or science or whatever it might've been and make it fun. It never seemed like a slog.

[00:05:52] Adam Johnson: So I absolutely credit her amongst others for helping me understand at an early age that learning could be fun, didn't have to be a slog. So yeah, I think I was a fairly well-rounded child. Like I liked to be outside. I like to run around and do all the things that kids do.

[00:06:07] Adam Johnson: And then by the time I got to middle school, I did what most boys, at least in Texas, do. I started playing football and I was lucky in middle school and very unlucky in high school in so much as that I grew super early and then stopped. So I was on the A team in seventh and eighth grade football and then high school came around and it was like maybe not.

[00:06:28] Adam Johnson: We've stopped growing. But anyway, I had a great childhood and super varied interests and I played a smattering of sports, but I was never like the best sportsman, but I enjoyed doing it.

[00:06:37] Jake Nicholson: What did your dad do?

[00:06:40] Adam Johnson: So my dad, as may come as no surprise in a Texas household, was in oil and gas. So he was born in Midland, Texas, which is out in the Permian Basin. And basically he made his way down to Austin. I think he was probably 20 or something like that, maybe 19, and that was what he knew, right?

[00:06:57] Adam Johnson: Like the Midland, Texas, West Texas Permian Basin of the 1970s was basically just oil. That's all there was out there. And I think he took that and ran with it. And to my dad's credit, I look back at my childhood and what influenced me when I think about my personality today and my dad was definitely like the most stereotypical entrepreneur you could find.

[00:07:18] Adam Johnson: Just absolutely like a relentless character and just really, I think, driven to make something of himself, but also to prove himself. He didn't come from anything at all, really. His dad was a used car salesman and a high school football coach. And they didn't really have much at all.

[00:07:33] Adam Johnson: And I think my dad wanted to get out of Midland, but he, I think, leveraged the sort of local industry knowledge that he had just from maybe growing up there to build a little career in oil and gas. And when I was growing up, it was like a lot of entrepreneurial journeys: very up and down. We had moments of feeling like, even in the 18 years of me being in my parents' household, high moments and low moments that are probably pretty, pretty deeply instilled in me.

[00:07:58] Jake Nicholson: And so did that normalize the ups and downs of entrepreneurship for you? Or did it scare you off initially and make you think, "I'm never going to run a business"?

[00:08:07] Adam Johnson: Well, yeah, I think definitely when I think back to the evolution of what am I going to do with my life? Which for me, my mother died when I was 14. She died of cancer when I was 14 and, as I alluded to, she was the guiding light in our household in terms of putting us through good schools and making sure that we had a really good education and was really the driver there.

[00:08:30] Adam Johnson: And my dad was definitely on the grittier side of things, to use that term again. But when I graduated from high school, I went to Indiana University. And it's interesting. I look back to my my time in high school. I went to a great high school in Austin called Westlake.

[00:08:45] Adam Johnson: But I didn't have so much direction just in terms of what the next chapter of life might look like. My dad hadn't gone to college. My mom had passed away four years before that. And so it was just, I was on my own and I ended up just through some series of strange circumstances applying to Indiana University, which I probably would have never done.

[00:09:03] Adam Johnson: But one of my really good friends, her whole family had gone there. Her two older siblings who I knew quite well had gone there and I just applied on a whim. I didn't really think about it. But so as I was applying for college, I did business undergrad.

[00:09:16] Adam Johnson: But it was, I did what's called a BEPP degree, so Business, Economics, and Public Policy. So it wasn't like accounting or finance. It was a bit more, a bit more holistic, looking at business in the context of public policy and broader economics. But so I went there and I had a good time in undergrad.

[00:09:29] Adam Johnson: I think I realized quite quickly that the Midwest maybe wasn't a cultural fit for me in the long term, but I had a great time there. I really enjoyed my college experience. And I think playing on the theme from earlier, it was the first time that I was studying something and could sink my teeth into something that was really practical.

[00:09:49] Adam Johnson: It was like, okay, this is how the world works. And to answer your question, like that experience definitely drove me to want to avoid at least starting my career out doing my own thing. It was very clear that, okay, I have an educational background here.

[00:10:04] Adam Johnson: My dad didn't. Like, I now understand the things that I know that maybe he didn't know, and also have context for the things that I don't know. And that's a lot of things. So yeah, I think I was definitely, I was definitely afraid maybe subconsciously of making entrepreneurship like the career path that was going to be inevitable for me, but I was always interested in it.

[00:10:27] Adam Johnson: And I think maybe that's just innate. The first job I took while I was still, I was still a junior in between my junior and senior years of college, I went out and did an internship with a really early-stage startup in Palo Alto. And I think that might signal that I was actually quite interested in entrepreneurship, because I really did, I think maybe it was partially the time, 2010, 2011, Silicon Valley, it was like a very hopeful time.

[00:10:55] Adam Johnson: And it was the beginning of what felt like something pretty big. I remember getting to San Francisco for the first week and someone was like, download this app called Uber, where you can get a black car. And it's to think about the world and how much it's changed. But yeah, no, I think I was definitely averse to this idea of the volatility that entrepreneurship can bring through my dad's sort of experience in watching that.

[00:11:14] Adam Johnson: But clearly my first choice of where I wanted to go and work maybe disproves that or at least overrode that.

[00:11:24] Jake Nicholson: Let's go to that. Your first four years, I believe post-undergrad, you did about a year at that startup you mentioned in sales at WePay and then another few years in business development at Voxbone before rising to GM of North America at Voxbone. I'm interested in those four years of sales and BD.

[00:11:49] Jake Nicholson: I find that MBAs, and particularly MBAs who pursue the search fund path, rarely have a sales background or sales experience. How did you fit in that function, that sales function, how did it mesh with your personality and what did you learn from those four years?

[00:12:12] Adam Johnson: Yeah. So let me start at WePay, and I'll start in my internship year and then on to Voxbone. The WePay story is super interesting and to this day, some of my closest friends in life are folks who I was in that summer with at WePay in sales, which is actually pretty crazy.

[00:12:30] Adam Johnson: We were at a wedding back in October and basically the sort of broader group of people at this wedding came from WePay or some branch off of it. And Bill Clerico was the CEO of WePay and who has remained connected to us in lots of different ways along with Tyler Gaffney, who was the head of different roles at once—he was the head of sales and then I think director of revenue generation or something like this.

[00:12:53] Adam Johnson: All of us were at the wedding and we're like, oh my God, we have to send a picture to Bill. So we did probably a bit too many drinks in to have been wise about that. But in any case, it was all that to say

[00:13:02] Jake Nicholson: you can make that picture the cover photo of this.

[00:13:05] Adam Johnson: Yeah, there were maybe one too many wigs in the photo. Yeah. But all that to say, it was just a super formative time, both personally and professionally for me.

[00:13:15] Adam Johnson: So Bill Clerico and Rich Aberman started WePay a few years, maybe one or two years before they had raised the round of money that enabled that sort of year to happen. And they brought in an intern class of, I want to say there were 10 of us. And we were all sort of, either between our junior and senior years or just having graduated.

[00:13:34] Adam Johnson: And most of the group was either sort of USC, Stanford, some Santa Clara. And then me, this weird guy who was like emailing the company incessantly, being like, "Can I come work for you? I live in Indiana." But anyway, we spent the summer really, I think, trying to understand, you know, what it means to be an adult, number one. But then number two, Rich and Bill had a real vision for what they were trying to achieve for the business.

[00:13:59] Adam Johnson: It felt very, very mission-oriented, like it felt like we really had something to achieve. And I think, I take a lot of lessons from the clarity that they were able to deliver downwards. And I don't even know if they would recognize this, but they really did have a lot of clarity.

[00:14:14] Adam Johnson: And what did sales mean at that time? When we were in that summer, WePay was still in its infancy as a product. And they were still trying to figure out where was the right product-market fit? Who is the market for what we're trying to do? At that time,

[00:14:27] Adam Johnson: it was very much a peer-to-peer. It was like group payments for like trips and ski holidays and class functions or whatever it might be. And it was a hard sell. You're talking to people who usually don't have that much money and you're just trying to convince them to use this product that is evolving super rapidly.

[00:14:44] Adam Johnson: Anyway, clearly we all drank the Kool-Aid because I want to say 80% of the intern class came back full-time the next year. And in classic Silicon Valley pace, when we came back, the company was basically completely different. Like product-market

[00:14:58] Adam Johnson: fit was completely different. It had moved from being a group payments platform to being a much broader sort of small business-oriented payments platform. They developed an API sort of over the course of the year. And so we came back to what was effectively a totally different company—same people but totally different company.

[00:15:16] Adam Johnson: Anyway, it was just, I think that was like, I'm speaking off the cuff here, I've not really digested this, but I think it was maybe a lesson in how to be adaptable in the context of sales. Yeah, we're in the same company, but now we're selling a completely different product to a completely different market.

[00:15:28] Adam Johnson: But we had clear vision from the top on what it is that we were trying to do. And I remember there was an investor in WePay, a guy called Peter Bell who's a very successful VC in Silicon Valley. And he came and did a little talk and I, for whatever reason, it just, it's really stuck with me for a long time.

[00:15:47] Adam Johnson: And the talk was just very simply about the importance of sales as a skill that, broad more broadly in your career, whether you're an engineer, whether you're an accountant, it doesn't really matter. If you're going to do something entrepreneurial, your whole job is sales.

[00:16:06] Adam Johnson: You have to sell yourself, you have to sell your product, et cetera, et cetera. So, I don't know if that was like an intentional session that Bill and Rich... I doubt they thought, "Okay, Peter's going to come and talk about the importance of sales, and it's going to really land with some folks for the next 15 years," but it did.

[00:16:22] Adam Johnson: Because I think for a long time, actually, I was embarrassed, if I'm honest, by the fact that I had gone into sales. I thought it was like

[00:16:28] Adam Johnson: a lesser art form, for lack of a better term. And I think about linking this to your question earlier about pursuing entrepreneurship.

[00:16:36] Adam Johnson: I think going into sales for me was probably a response to that in so many ways of, okay, this is a way for me to make money. It's not super risky. Like I'm obviously taking a slight risk by going to a startup, but there are always going to be salespeople.

[00:16:51] Adam Johnson: So it was basically a hedging of my risk, I think. But there was an element of, I think, embarrassment about sort of the lack of sophistication, for lack of a better term, about what it meant to be in sales.

[00:17:02] Adam Johnson: And I think, especially when you're first starting your career, there's a lot of personal weight

[00:17:08] Adam Johnson: that you put on what it is that you're doing. And you've got friends going off to work in banking or going off to law school or whatever. And, okay, I'm going to be in sales. At least I was saying I was going to Silicon Valley. That was like the one thing that made me feel a little bit better.

[00:17:20] Adam Johnson: But it was, I just, I can vividly remember that conversation and Peter being this really successful VC standing in front of us saying, "Doesn't matter what people say, sales is going to be the most important thing." And that, I think, that just got me comfortable with it and stayed there for a year.

[00:17:34] Adam Johnson: I was then introduced to a guy who was coming over to start the US office of this Belgian telecoms company called Voxbone. And they were hiring the first people in the US to cater to a growing US customer base. And so I was brought on as the second employee in the US.

[00:17:52] Adam Johnson: And then as you said, did that for a couple of years and, just through sheer chance, if I'm honest, and through having a pretty good relationship with the CEO at the time, was entrusted to lead the North American arm as we were growing that.

[00:18:03] Adam Johnson: And it was a real sort of, it was a real journey. It was a fantastic company, Voxbone. It was super interesting. Going back to your question about my childhood, I always just had a fascination with seeing the world and getting out and not being claustrophobic or trapped wherever I was.

[00:18:19] Adam Johnson: I was just, as a kid, even, I would have dreams of specific cities around the world, which is a bit weird, maybe. But so I had this opportunity and I met this guy and he was like, "Yeah, we've got this really interesting dynamic company. It's based in Brussels.

[00:18:31] Adam Johnson: You're going to come to Brussels for the summer if you work for us and you'll go back every quarter or whatever." And so I was like, super enthralled by this whole prospect. And then I was like, okay, so I've got to really understand what this company does.

[00:18:44] Adam Johnson: It's not very clear. And it was basically like, the long and short is that they sold telephone numbers.

[00:18:50] Jake Nicholson: Yep.

[00:18:51] Adam Johnson: You cannot get any more boring than that. And so I was like, "Oh my God, like I have got to find a narrative to make this sound more interesting than it appears to be on the surface."

[00:19:01] Adam Johnson: And fortunately, the technology that enabled the actual service offering that Voxbone was selling was super interesting. And the regulatory dynamics that were at play and the regulatory limitations that actually made it a valuable product ended up being super interesting and played to my undergrad studies, et cetera.

[00:19:22] Adam Johnson: So, I ended up jumping over and being there, as I said, for a number of years after being in sales. But in the role of GM of North America, I think the real sort of pivot for me in terms of my career and thinking, okay, I've actually got some options here.

[00:19:37] Adam Johnson: We were bought by a private equity company based in London called Vitruvian. And I was fortunate to see that process not from the inside, inside, but at least get a sense, okay, what does it mean to be owned by private equity?

[00:19:50] Adam Johnson: What is private equity actually? And so that sort of broadened my view of the possible. I had been so focused on sort of startups and actually by the time I was a few years into Voxbone, I had gotten comfortable with the idea that at some point I would definitely want to do my own startup.

[00:20:06] Adam Johnson: That was the big plan, at least in my head. But this sort of experience of going through a private equity buyout, I think, shifted my sort of vision or understanding of where the likelihood of generating some wealth actually lies. And is it in doing a startup or, on a risk-adjusted basis, maybe not.

[00:20:24] Adam Johnson: But either way, it was after a few years there of running the North American operation and just recognizing that I would probably need some more skills or at least have more exposure to other things. I decided to go back and do an MBA.

[00:20:37] Jake Nicholson: Tell me, did you get a chance to manage a team as GM?

[00:20:41] Adam Johnson: Yeah. Yeah.

[00:20:42] Jake Nicholson: That was your first time managing people?

[00:20:45] Adam Johnson: Yeah, it was. So the setup was interesting. We had this sort of North American entity and the guy who hired me was a guy called Sebastian Dursell, who was, I would actually, this is a great reminder, I should reach out to him 'cause he's a great guy. Voxbone was started by two guys in Brussels and they saw this little niche in the market of basically companies doing business across Europe, pan-European companies. And then effectively, because of the nature of Europe, you would have to have a bilateral relationship with the telcos in every country to enable a telephone number, basically.

[00:21:16] Adam Johnson: So if you've got sales going on in Italy, you've got sales going on in France and Spain, whatever. If you wanted to give folks in those countries a telephone number to call for whatever reason, you'd have to have a contract with Orange or with Telecom Italia or whatever it might be.

[00:21:29] Adam Johnson: and we just consolidated as many countries as possible into one contract and enable you to source those numbers and manage them in one place. So that was like the genesis and it was a classic startup. Brussels, maybe not the most well known for startups, but they definitely took sort of a Silicon Valley-style approach to this sort of thing.

[00:21:43] Adam Johnson: And Seb had been there from the get-go, was the first CFO. And then he came over as MD of North America. And after a year of hiring, he hired myself and a few others. He left the company a year later. And it was at that point that Itai Rosenfeld, who was the CEO, agreed to put me in charge of the U.S. entity.

[00:22:05] Adam Johnson: S. entity. So we had the situation where for the first year I was basically like the babysitter; like the line manager was still going back to Brussels for everybody, but I was effectively responsible for the day-to-day. And then as time went on, I ended up basically being responsible for everything.

[00:22:20] Adam Johnson: So we went from a team of probably four when Seb left to, there was a, there, I think I ended up actually opening an office in Austin of all places. So we had the geographical movement and then between the two offices, there were probably 12 to 15, maybe by the time I left, inclusive of lots of different functions.

[00:22:37] Adam Johnson: We had a lawyer, we had operational folks, sales, et cetera, et cetera. From an early age, I was 25 when I took that and then was responsible for a decent P&L, a large chunk of people, hired, fired people, et cetera, et cetera.

[00:22:50] Adam Johnson: And did that probably a bit earlier than would have been the case otherwise.

[00:22:54] Jake Nicholson: So you were effectively running a business within a business. And you mentioned that you wanted to go get some additional skill sets and you did so by going to LBS for your MBA. As you matriculated, did you know coming out of LBS that you were going to run a business again?

[00:23:11] Jake Nicholson: Or was it unclear?

[00:23:14] Adam Johnson: So when I went to LBS, I think this is true of a lot of folks who do MBAs. I was very open-minded, if I'm honest, about what my next chapter was going to look like. The experiences that I had at WePay and Voxbone were obviously both experiences in small startup or scale-up companies.

[00:23:34] Adam Johnson: And so, I had never really, with the exception of not even really the other internships that I had in undergrad, I'd just never really been a part of a large company and I don't think I would be particularly good at it, if I'm honest. But I was pretty open-minded and I did, the first year, do all of the consulting prep and interviews for consulting companies.

[00:23:55] Adam Johnson: And I thought about doing any number of things, was terrible at consulting interviews, if I'm honest, which now is a blessing in disguise. But sort of the exposure to ETA came from, I think, a pivot to me being quite serious about doing my own business and doing a startup.

[00:24:12] Adam Johnson: So whilst I was there, I started basically taking any sort of entrepreneurial class I could. I had a couple of ideas, some of which were relatively developed by the time I got to the second year. But I was actually like fairly, I was fairly serious about pursuing a few of them.

[00:24:30] Adam Johnson: But then I was also quite clear-eyed about the fact that especially if you wanted to stay in London, which I did, raising money for an early-stage seed or series A startup and the salary that you might be able to pay yourself with that was not going to be that interesting, especially after two years of being in an MBA and really not acting like I was from a budgetary perspective.

[00:24:53] Adam Johnson: So I was keen to make sure that I could pay myself a decent amount of money. And so I was in this sort of predicament where I knew from a fulfillment perspective, doing something entrepreneurial was really where I wanted to land, but from a practical perspective, I was being pulled in another direction. And that's, it was at that point halfway through the MBA that I was introduced to the concept of search funds and it was a one-two punch. LBS didn't have an ETA course at the time or like an ETA club or anything and it was still very sort of under the radar.

[00:25:25] Adam Johnson: But I took a class called Financing the Entrepreneurial Business and one of the case studies that you read, basically one of the sessions, is an LBS case study about search funds. And the same week, literally the same week that I was in that class, I became obsessed with the case study.

[00:25:41] Adam Johnson: Um, I read it several times, which is highly unusual, let me tell you. The same week, I follow friends who I went to undergrad with on LinkedIn, but don't really keep in touch with them. And there was this one guy who I'd been in undergrad at Indiana with and followed his career progression and he had finished doing his MBA at Northwestern.

[00:25:58] Adam Johnson: And I noticed that he had gone from being an MBA student to being a managing partner at a fund and I was like, "Wow, like what, how did he do that? That's impressive." And I noticed that weekend that I read the search fund case study and it clicked and I was like, "Oh. I wonder if that's what he did."

[00:26:12] Adam Johnson: And obviously it was what he did. But anyway, so I became academically obsessed with this quite quickly. And then I spoke to Will, who bought a great little company in Texas maybe five or six years ago and has since sold it. I spoke to him early days to get an unfiltered view of things as much as possible.

[00:26:28] Adam Johnson: And and it just went from there. And basically, I was looking for something to dissuade me rather than...

[00:26:34] Jake Nicholson: Yeah when people come to me saying they're thinking about pursuing ETA, one of the first things I do is I send them a large pool of resources to read and I give them the guidance that if they find themselves hungrily reading more and consuming that material voraciously, then maybe they're on the right track.

[00:26:55] Jake Nicholson: And if they find themselves getting distracted by something else then maybe not. And it sounds like you clearly got the bug.

[00:27:02] Adam Johnson: It's definitely, it was rare, I will say, it's rare that you become infatuated with something like this, but it just made sense to me. And I think if you have, I think it's really lucky not a lot of people from a career perspective, at least can say that, they get a bit obsessed with what they're doing.

[00:27:19] Adam Johnson: And I I totally felt that with the search.

[00:27:27] Jake Nicholson: Given your background before the MBA and the skillset you had built before the MBA, to what extent do you think the MBA enabled you to pursue a search fund? And to what extent do you think that the MBA and what you learned during the MBA improved your chances of being successful as an ETA entrepreneur?

[00:27:49] Adam Johnson: So yeah, on the first part, did it give me a ticket to get on the ride? Definitely, for sure. For sure, like maybe two elements of this. So one is the actual skillset or knowledge base that you acquire. And I think that maybe just more than anything, a vocabulary, just being able to speak about acquisitions, being able to speak about what it might mean to build a leveraged buyout model which, obviously being in sales and general management before, I just wouldn't have done.

[00:28:26] Adam Johnson: So practically, I think it definitely opens that door if you are willing to at least put yourself in situations within the MBA where you can absorb those things or at least become familiar with them. Yeah. No MBA, anybody who's done an MBA, these are not the most academic of environments.

[00:28:44] Adam Johnson: They don't have to be if you don't want them to be, but they can be. And I think there was definitely like a skill gap for me, which, you know, having taken some of these courses and taking the time, I think to get educated definitely went from zero to one, basically, in my ability to speak this language.

[00:29:00] Adam Johnson: And then two, I think, again, there is a reputational hurdle. And I think there's a signal that this is the story of an MBA since the MBA was born, right? Is that, okay, if you've gone to Harvard, if you've gone to Stanford, or LBS is a good school.

[00:29:15] Adam Johnson: I'll say that it is because it's a good signal to investors that like, okay, we've just got a base level clearance here of either common sense or intelligence. And so, today the search fund market for searchers is much deeper and much wider than it was in 2018 when I was first exploring this. Really, at that point, there was a subset of MBA programs, maybe 6 to 10, where this was even known and where the sort of, for lack of a better term, old guard of search investors would accept as valuable. And fortunately, Simon Webster, he paved the way for non-

[00:29:49] Adam Johnson: US searchers and obviously was an LBS alum, there's just a bit of a legacy or a history there. So yeah, I definitely think I wouldn't have known about it. I probably would not have had the vocabulary to speak about it. And I definitely would not have had, at least at that time, the credentials to open the door.

[00:30:05] Adam Johnson: And then the second part of your question, I mean, I look to the MBA, but then I also look to my experience working prior to the MBA and what elements of those experiences led me to have a greater chance of success. I think that was the question.

[00:30:19] Adam Johnson: I don't know. Going back to the comment about this VC Peter Bell having a conversation with us as a group of sort of sales folks in 2011, I really do attribute my ability to speak to people and to your point at the beginning of the podcast, just tell a little bit of a story.

[00:30:37] Adam Johnson: to a lot of the success, at least in, when you're raising money or when you're trying to convince a seller to sell to you, right? That is all storytelling. You need to be able to understand the finances of any business that you're running. You need to be able to manipulate data in order to help you tell that story.

[00:30:56] Adam Johnson: But there are plenty of people who can manipulate data and understand finances and not be able to communicate that back to the rest of the world. And I think that's a super important part for anyone who's going to go down an ETA path to understand. The critical moments on the ETA journey are not in a spreadsheet.

[00:31:15] Adam Johnson: They are in a room with other people, whether that's an investor or a seller or then, once you start running the business, critically, the people who are working in the business and doing the actual enablement of the company moving from one day to the next.

[00:31:29] Adam Johnson: Business is people, is like the oldest mantra in business maybe, but it's true. And I think it's super easy to just lose that. And I look to my experience at WePay and Voxbone and I'm super grateful that I was enabled by people who believed in me to to get out there and experience some stuff.

[00:31:47] Jake Nicholson: Awesome. I'm gonna fast forward a bit. You ultimately bought a company called Water Direct. What does your business do?

[00:31:55] Adam Johnson: What do we do? It's a bit of a peculiar one and I tend to preface the elevator pitch by saying it's a very tall building because it takes some context.

[00:32:03] Jake Nicholson: Go for it.

[00:32:04] Adam Johnson: But effectively we are a provider of what we call alternative and emergency water services. So that in effect, in so many ways, means that we move

[00:32:14] Adam Johnson: around bulk quantities of water and it's all consumable, potable, utility-grade water. And the markets that we serve are sort of two distinct markets. One is the water utility companies in the UK and a lot of the context for the value that we provide lies in the peculiarities of the UK water industry.

[00:32:34] Adam Johnson: And I'll save that maybe for later. But effectively there are regulations which require the water utility companies, which are all privately owned, to fund and make sure that they have preparations in place for outages. And when there are outages, there's a legal requirement that these companies deliver an alternative supply to households.

[00:32:51] Adam Johnson: That's when we're working with our utility partners, we are delivering a legally required alternative supply of potable water to their customers. And that can be done either through bulk tanker injection into the network. So we've got big 30,000 and 18,000 liter.

[00:33:06] Adam Johnson: trucks that run around in sort of intelligent pumping systems on them and replace the mains supply when it might fail for whatever reason, if it could be a mains burst or contamination, whatever. And then the other market that we serve is what we just call commercial.

[00:33:19] Adam Johnson: And that can be literally any sort of non-utility entity that has bulk water as an input to their operations. It could be a festival and event, it could be a large manufacturing facility, it could be a food processing facility, et cetera, et cetera. A very sort of diverse customer base on the commercial side that we deliver water to. And so that's the core of the business is that sort of logistics of moving large quantities of water around.

[00:33:46] Adam Johnson: And then we've also got an element of the business, which is, I use the word assurance very purposefully. It's not an insurance product. We don't sell insurance, but we do sell guaranteed response to businesses who need risk mitigation for continuity of supply of water.

[00:34:01] Jake Nicholson: Yeah. Interesting. I was reviewing your website to better understand the business a little bit. What is a Bowser?

[00:34:08] Adam Johnson: Jake, I hope you were reviewing the website either on or after Thursday, because we launched a new one.

[00:34:14] Jake Nicholson: It looks beautiful.

[00:34:15] Adam Johnson: Yeah, good. A Bowser... we don't do that much Bowsering. We'll do some Bowsering if it's required. It's a bit of a legacy thing, but basically it's a smaller, towable tank of water.

[00:34:24] Adam Johnson: Anywhere from 1,000 to 3,000 liters. And it could be for, I don't know, let's say you might have a large event or something that just needs a decent quantity of water, but not...

[00:34:34] Jake Nicholson: My ignorance, I hadn't heard the word outside of Mario Brothers.

[00:34:41] Adam Johnson: I have thought a few times about putting a little sort of shell on top.

[00:34:45] Jake Nicholson: There you go. Yeah. At the time of acquisition, what was the approximate footprint or size? And what did you like about the business?

[00:34:55] Adam Johnson: Yeah. So the business, we had just under 50 people. We acquired it actually three years ago tomorrow. And yeah, thanks. And it was doing about 10 million in revenue and just under four in EBITDA.

[00:35:09] Jake Nicholson: Nice margins. Yeah.

[00:35:09] Adam Johnson: Definitely unusual for the sort of industry we're in, but I liked it for a number of reasons.

[00:35:14] Adam Johnson: I have to tell you that it was not, it wasn't an obvious asset.

[00:35:18] Adam Johnson: For me, it was obvious from the beginning for a couple of reasons, which I'll get into in a second. But there are a lot of qualities about Water Direct, which fall slightly out of the fairway of what would be considered a normal search.

[00:35:31] Adam Johnson: I'll frame what I liked about it in the context of an event that happened. So in the middle of my search, I started my search in earnest sort of in January of 2020, and then COVID hit, obviously, two months later, and it just, yeah, it was an odd time to be in search or be searching.

[00:35:48] Adam Johnson: Nobody was really interested in selling, so I lost quite a bit of time and I had to reframe and rethink my strategy, which I did in the autumn of 2020 and I threw a Hail Mary and I brought on, I can't remember, I brought on eight and then I had in total nine interns because I'd had one with me since the beginning.

[00:36:04] Adam Johnson: But I effectively ran this operation where, I've said this in other podcasts, I won't take too much time on this, but everybody had their own independent search going on in parallel. And one of the searches was looking at waste management and then through that search WaterDirect slipped through the cracks because WaterDirect was owned by a group which was wholly owned by a single shareholder, which is how it came through.

[00:36:25] Adam Johnson: And one of the other companies in the group was a waste management company. And so I was getting on a call with the owners and this was in February of '21 and the week that I had this call, some listeners in the U.S. might remember that in February of 2021, there was a huge blizzard across the entire state of Texas, which basically all 254 counties in Texas were under a foot of snow and freezing temperatures for a week.

[00:36:50] Adam Johnson: It was basically a meteorological situation that none of the models would have ever predicted and if you remember this, the grid, the state electrical grid failed. And because of that you had a knock-on domino effect across all sorts of different kinds of utilities.

[00:37:06] Adam Johnson: And I just remember being on Instagram, whatever, looking at friends back home and even talking to my grandma. And the critical thing is that people were saying, obviously the pipes were frozen, so water wasn't coming out anyway, but there were boil water notices, et cetera, et cetera.

[00:37:18] Adam Johnson: And it had been going on for long enough that people were having to drive around from gas station to gas station to try and find a bottle of water. And this was going on and I was doing my research into Water Direct as I was watching this happen. And it just clicked that okay.

[00:37:32] Adam Johnson: Outside of the context of having watched this situation happen back home, I would have looked probably at Water Direct and thought, "Selling water to British people sounds like a pretty terrible idea. You've got plenty of it, we don't need to get into that business."

[00:37:46] Adam Johnson: But I realized quite quickly that it wasn't about source water. It wasn't about that. It was about asset failure, infrastructure failure. And you could get up to speed pretty quickly in the UK by doing some very light research. And you'll understand that there's been chronic underinvestment in the water infrastructure for the better part of 40 to 50 years in the UK.

[00:38:09] Adam Johnson: And along with that was an increasing rate of asset failure. You layer on top of that population growth and demographic shifts throughout the country and on top of that, what I, the rest of the world would probably call tame, but what we here call extreme weather events, that are just, all of these factors basically are causing or likely would cause an increasing rate of outages in the water infrastructure and then, unless you're into this sort of thing, you'd never go to the next layer deeper to understand what are the regulatory

[00:38:44] Adam Johnson: implications for outages on the businesses who are responsible for these assets. And a bit of research again, quite quickly, you'd realize that the regulatory requirements that they have to deliver alternative supplies are increasing. The enforcement of these regulations is increasing and really the story of the demand on a very macro level for the service that we provide was really not obvious.

[00:39:10] Adam Johnson: But once you did some research, it became very clear. The other thing was that Water Direct, because this is such a niche industry, we did not have any direct competitors at the time with the exception of the utilities themselves. So it was a real insourcing question. So there were lots of things about it.

[00:39:27] Adam Johnson: I would suggest that on a very sort of industry tailwinds basis, it's hard to tell a story about industry tailwinds when you're the only company doing what you're doing. But the industry tailwinds really were a story built around those macro trends and the regulations that surround them.

[00:39:46] Adam Johnson: And I got super excited about that. Doing some further research into the business, why was the seller willing to sell it? It was because they genuinely didn't either fully understand what they had or more likely they were just distracted doing other things.

[00:40:02] Adam Johnson: They had eight other businesses in the group that were completely unrelated to Water Direct. And even though Water Direct was a nice little cash cow, that was another thing I liked about it. The cash conversion was incredible. They just, they were viewing it as, okay, we can get a few million cash out of this thing every year and fund our other stuff.

[00:40:18] Adam Johnson: And my view on this was, this is just an absolute waste and unless somebody takes control of this business and really sets a strategy, it will likely fall off a cliff. So I think on a relative basis, if you're looking at the normal search fund asset, repeat revenue was quite good.

[00:40:36] Adam Johnson: We had the same sort of subset of utility customers for a very long time, barring one or two. But recurring contractual recurring revenue was garbage. Sub 10%. That, from a traditional search lens perspective, pretty left field, but lots of other stuff too.

[00:40:51] Adam Johnson: Relative low capital intensity. We've got a fleet of trucks, but it's, you don't have to buy them every year and they last a pretty long time. And there's really no other capital requirements in the business beyond that. So yeah, a lot, lots of different things and it, I think the uniqueness of it made it super interesting to me and was probably maybe a slightly riskier move.

[00:41:11] Adam Johnson: Probably had a slightly bigger upside potentially than something a bit steadier. But yeah.

[00:41:15] Jake Nicholson: Thank you for taking us through that. That's, I think, a super valuable example of a business, an opportunity that requires looking below the surface a little bit to understand. And if an investor gets a teaser in their inbox that has something about selling water with a picture of a fleet of trucks,

[00:41:38] Jake Nicholson: they might not instinctively think that this is a real juicy opportunity, but to your point, if you dig in and you understand it a little bit more, it becomes more clear and there are quite a few opportunities out there like that. It's really interesting. So you've been running this business for a little over, or almost three years.

[00:41:57] Jake Nicholson: And you had managed a team before as GM, a team of 12-ish in the U.S. Then you bought this business and all of a sudden you're a CEO with skin in the game and responsible for 50-plus employees. And maybe even more now, what has been really difficult about the CEO journey so far?

[00:42:16] Adam Johnson: Look, so we've had a whirlwind three years. The, you step in and I think, the story of day one, week one, first hundred days, whatever sort of length of time you want to look at there, for most of us who do this kooky thing, it's a weird time.

[00:42:35] Adam Johnson: I wouldn't necessarily say it's a hard time because it's super exciting. You've spent so much time and emotional energy into trying to get a deal across the line. And then it happens and you come into the business and you very quickly realize that it's only the beginning. And I was alluding to this earlier, once you step into the CEO role, it is entirely a game of influencing people to get behind a particular vision for what you're trying to do. And when you are, I had a vision for where I thought the business could go, but I knew very well. And it's, I think it's pretty well established and universally agreed,

[00:43:16] Adam Johnson: the idea that you probably shouldn't do anything drastic for a little while after you get into the business. And so you're in this sort of liminal space at the beginning where you may have a big vision, but you don't really want to do anything. And it's an exercise really at the beginning of just having conversations with people, understanding where do people fit in the business?

[00:43:35] Adam Johnson: Are they a contributor or are they a detractor? Do they have the potential to be here? Do they not? It's just a lot of assessing people. And so I think as you go along, you start to get more comfortable with an understanding of the business and the people in it. You get an understanding for how you want to prioritize

[00:43:54] Adam Johnson: value creation activity. Year one really is not about value creation. It's about stabilizing the business and making sure you understand it. But once you get to the point of engaging in value creation activity, you have to make some really challenging calls about the people in the business.

[00:44:08] Adam Johnson: And I think for me as someone who, I would suggest, that I'm probably a people person and maybe to my detriment, a people pleaser, making hard decisions about who can remain in the business to be a contributor as you go forward is probably the hardest thing, really. That's a really long way of answering and saying firing people sucks.

[00:44:28] Jake Nicholson: Yeah, no it's a delicate subject. What about the past three years running this company as CEO have you really loved?

[00:44:35] Adam Johnson: Yeah, look, we are at our core. We've got, the business does a lot of planned work day-to-day, but the DNA of the business is as an emergency response company. So if the water goes off, we're treated as the fire department or the police to the water utility company.

[00:44:51] Adam Johnson: And we're expected to get there in no time. And we're expected to behave in a certain way. And, if things aren't going right, I've spent many hours over the last couple of years on the phone with varying levels of government, varying levels of the C-suite of

[00:45:04] Adam Johnson: these water utility companies because for them in moments of crisis, they're getting pressure from members of parliament. They're getting pressure from the local authorities, et cetera, et cetera. And it's just a very high-intensity environment that we have to operate in.

[00:45:20] Adam Johnson: And so whilst that can be an absolute drain, it's also super exciting.

[00:45:25] Adam Johnson: You're in the midst of what can be very significant incidents. You have, for example, over Christmas, there was the city of Southampton lost its supply of water. You had 120,000 people without water in the lead-up to Christmas.

[00:45:39] Adam Johnson: This is not a good thing. And to be involved in really interesting stuff like that is fun. That's a very Water Direct-specific answer. I think maybe more applicable to the broader ETA community is that I, and maybe this speaks to the business we bought, but it also might speak to my inclination for entrepreneurship

[00:45:58] Adam Johnson: more generally, we've had a real, we've had a real fun time, I will say, in evolving the business and building things within this business that help deliver a better service to our customers. We're in the lucky position of knowing that we've got a really good product-market fit.

[00:46:16] Adam Johnson: We know there's going to be demand for our services moving forward. That's not a question, but in order to keep our customers from becoming our competitors, we have to be ahead of the game in terms of service delivery and what that looks like. Expectations are evolving very rapidly, et cetera.

[00:46:32] Adam Johnson: So all of that to say it's super fun to be able to take something which is an extant thing. This business exists. It has existed for 27 years. But be able to develop the next version of it as you go along and to see some of that come to life is just a real

[00:46:51] Adam Johnson: privilege. You hire people with the hopes that they might understand your vision and to get to see some of that vision manifest through other people's hard work, but other people's buy-in to your vision is just, it's amazing really. And you can't experience that until you've been doing this for a little while.

[00:47:07] Adam Johnson: And I think I'm just seeing the beginnings of some of this stuff. So it's super fun.

[00:47:11] Jake Nicholson: We talk in ETA, when we're talking about buying a business, we sometimes talk about buying someone's baby and then over time, hopefully it becomes your baby. And it sounds like from the way you're talking that that is indeed happening, which is really rewarding and fun to watch.

[00:47:30] Jake Nicholson: Searchers around the world are listening to your story, being inspired by your story, questioning how it relates to their own story. Europe, Australia, Latin America, parts of Asia. Many of them are brand new to search funds. What would you like to share with these aspiring entrepreneurs? Are there things that you wish you had known when you were weighing the pros and cons of embarking on this path?

[00:47:56] Adam Johnson: Yeah. Look, I think, not something that goes unsaid, if you've been to any sort of search fund conference or listened to any other podcast, I think the reality is that there's a statistical likelihood that you will find a business and a statistical likelihood that you won't. And not everybody does. I'm sitting here feeling very grateful for the position that I found myself in but there are a lot of other examples of people who are smarter than me, people who are maybe more diligent or hardworking than me who didn't find a business,

[00:48:25] Adam Johnson: And I think people, anybody who's going to seriously consider this, I go back to my comment earlier about, I was looking for something to dissuade me from pursuing search.

[00:48:33] Adam Johnson: The risk is really there. So if you're not willing to take on that risk, and if you don't have a pretty clear view for, "Okay, why am I doing this?" then I think it can be really challenging. So just be, I'd encourage people to, classic piece of advice,

[00:48:50] Adam Johnson: speak to as many people as you can. Everybody's experience with entrepreneurship broadly is going to be unique. And trying to form a view of whether or not this is the right path for you can only be done through looking, for lack of a better term, into the kaleidoscope, because everybody's experience is different and yours will not mimic anybody that you speak to, but it might at least have quite a few elements from lots of people that you speak to.

[00:49:13] Adam Johnson: Just be aware that there is no guarantee. There is no guarantee that this is a shortcut to wealth creation or to becoming the CEO of a company. You know, you have to put in the work and there's risk associated with that.

[00:49:30] Jake Nicholson: If you would give us a small sneak peek of what's next for you and Water Direct, what would success look like for you and the business over the next couple of years?

[00:49:40] Adam Johnson: Yeah. So we've been on a real evolution since I came in, really, but we've got a great, probably 9 to 12 months ahead of us this year. Water Direct has historically been a relatively analog business. We are a logistics business at the end of the day.

[00:49:57] Adam Johnson: And a lot of the logistics that we do is done by really hardworking people.

[00:50:01] Adam Johnson: We're making decisions on an analog basis day-to-day. And I mentioned the idea of trying to avoid our customers becoming our competitors, and what I mean by that is insourcing. And the best way to do that is to deliver an experience obviously that's better than what they could deliver for themselves.

[00:50:17] Adam Johnson: So we've built out a full sort of product and product development division and we're insourcing technical development and we've got a really nice roadmap over the next year of launching some sort of, let's call it, digitized versions of what we already do.

[00:50:35] Adam Johnson: So we're spending a lot of our organizational focus is being put into launching a more digitally enabled version of the service that we delivered already, which, for our customers, means better visibility. It means better control. It means better access to information, which is all stuff that they need.

[00:50:55] Adam Johnson: Yeah, the business is going to be much more digital. And in a few years time, we'll certainly explore going slightly outside of the bounds of the core services that we delivered today and the digital foundations that we're laying will be at the core of any sort of expansion beyond what we're doing.

[00:51:13] Adam Johnson: But that's at least the sneak preview.

[00:51:15] Jake Nicholson: Yeah, fantastic. Super exciting. I look forward to hopefully having you back on in a few years to hear how that panned out. In the meantime, I wish you all the success in the world with Water Direct. Thank you so much for sharing your story with us. On behalf of myself, my team and aspiring searchers around the world, really inspiring, educational and informative.

[00:51:39] Jake Nicholson: Thank you so much.

[00:51:41] Adam Johnson: Yeah. Thanks Jake. Appreciate it.

[00:51:45] Jake Nicholson: What a journey. Adam Johnson's story is a powerful reminder for all aspiring searchers that the path isn't always linear and sometimes the most valuable opportunities are hidden beneath a, quote unquote, boring surface. Key takeaways for me were the enduring importance of sales and communication skills, the need for adaptability, and the courage to see potential where others don't.

[00:52:13] Jake Nicholson: But Adam also grounded us in reality. The reality that the CEO role involves tough decisions, especially with people, and the search itself carries real risk. His final message resonates. Be diligent. Understand why you're doing this. Speak to as many people as possible, but know that your journey will be unique.

[00:52:37] Jake Nicholson: Thanks for tuning in, and we hope Adam's experience inspires you on your own path. Thank you for joining us on the Search Fund Podcast. We look forward to bringing you more stories of collaboration, resilience, and success in our next episode.

GLOBAL OUTRO

Jake Nicholson: Thanks so much for listening to this episode. If you enjoyed it, you can find more at the searchfundblog. com or wherever you listen to podcasts. I'm Jake Nicholson of SMEVentures, and you're listening to The Search Fund Podcast.