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Michael Girdley28 June 2022

Michael Girdley: Why Fireworks Are A Cash Cow and How to Operate a Holdco Worth $100 Million

6Frameworks
8Insights

Frameworks in this episode

Finance7 steps

Blend Compounders and Cash Cows — You Can't Live on Appreciation

Deliberately hold both businesses that compound and never pay you, and businesses that pay you monthly and never get huge.

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Strategy6 steps

Never Raise Without Putting Your Own Money In

Commit a substantial slice of your own net worth before you syndicate a deal — it settles the ethics and enforces the discipline.

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Innovation6 steps

The Do Cool Shit Budget

Ring-fence 15% of your budget for work that is disqualified if it has a measurable immediate payoff.

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Leadership6 steps

The HoldCo Inversion: Everything You Learned as an Operator Is Backwards

Running a holding company is the exact opposite of running a company, which is why most successful operators fail at it.

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Marketing7 steps

The Signature Object: Own a Small Piece of Mental Real Estate

Pick one uncool thing you genuinely love and mention it relentlessly, so people think of you every time they encounter it.

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Innovation7 steps

Wander Off the Beaten Path for Deal Flow

Go to ordinary places, ask what that building is, and stay long enough to watch the money move.

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Takeaway· 1

Takeaway46:00

'My Life Is Dope': Declared Identity as a Forcing Function

Shaan reads out a Kanye West quote about preferring people who want to make things as dope as possible and by default make money from it, over people who want money regardless of whether the thing is dope. He pairs it with the Dave Chappelle story of Kanye ending a phone call with 'because my life's dope and I do dope shit'. Shaan's extension is that declaring an identity is a forcing function — you live up to the reputation you assign yourself. He illustrates it with a Bebo practice: telling a colleague to treat every week's work as material for a talk he'd give the following year.

  • Kanye's stated preference: dopeness first, money as a by-product.
  • Most people wait for dope things to happen before claiming a dope life; Kanye declares it first.
  • Declared identity hardwires future behaviour — call yourself bold and you take the next bold risk.
  • At Bebo, Shaan told a colleague to frame every weekly task as future conference-talk material.
  • The effect was doing 'the more dope version of the task we were already going to do'.
  • Shaan wanted the Kanye quote as the podcast's opening clip.
  • Related hiring insight: people who believe in the mission more than the CEO does are invaluable early at a startup.

“for me dopeness is what i like most people who want to make things as dope as possible and by default make money from it”

Kanye West (quoted) · 50:00

“you'll kind of live up to that reputation if you believe that about yourself”

Shaan Puri · 48:00
#identity#mindset#motivation#culture

context· 1

context02:00

Inside Girdley Enterprises: 10 Businesses, $100M+ Revenue, 750+ Employees

Michael Girdley's holding company spans eight to ten businesses totalling over $100 million in revenue and more than 750 employees. The portfolio is deliberately eclectic: Alamo Fireworks (inherited family business), Dura Software (a software roll-up), a coding bootcamp, a drive-thru coffee chain, and incubated ventures including hirewithnear.com for hiring in Latin America. He holds 30-60% stakes rather than 100%, and is candid about the discomfort of discussing the numbers.

  • Eight to ten holdings, $100M+ combined revenue, 750+ employees.
  • Ownership stakes typically 30-60%, not outright.
  • Small businesses in the portfolio run 15-20% EBITDA margins.
  • Most cash is reinvested — he says he has no better place to put it than new acquisitions.
  • Structure is deliberately flexible because good opportunities have been hard to find for five years.
  • Shaan compares him to Andrew Wilkinson's Tiny as part of a 'HoldCo Mafia'.
  • Girdley is visibly uncomfortable discussing net worth: 'I'm from Texas and I have a hard time bragging.'

“i don't want to be the guy coming in and bullshitting about a bunch of numbers but also like i'm from texas and like i…”

Michael Girdley · 04:30
#holdco#portfolio#small-business#capital-allocation

teardown· 2

teardown08:30

Why Fireworks Is the Hardest Business He's Ever Run

Alamo Fireworks does multiple tens of millions in revenue across just two selling windows a year — the 4th of July and New Year's, which works in Texas because it stays warm. Girdley calls it the hardest business in the world to run. Cash goes out from January 2nd, demand must be forecast 6-12 months ahead, 200 Texas locations must be opened simultaneously, and because consumers buy at the last possible moment the business doesn't break even until roughly 7-8pm on the 4th of July itself.

  • Multiple tens of millions in revenue from two short selling seasons a year.
  • 200 locations across Texas, all opened for a compressed window.
  • Cash outlay begins January 2nd; break-even arrives around 7-8pm on July 4th.
  • All profit is made in roughly the final three hours because consumers don't buy ahead.
  • Demand must be predicted 6-12 months out in an unpredictable world.
  • Girdley inherited it — 'I was told I have a fireworks business now.'
  • Operational fixes came from others, including moving from handwritten to digital point of sale.
  • Chinese fireworks factories can't hire young workers — the workforce is around 70 years old.

“we really don't break even until about 7 or 8 p.m. on the night of the 4th of july”

Michael Girdley · 09:30

“when we started the coding bootcamp i was like you mean they pay us before we teach them the classes like this is amazing”

Michael Girdley · 10:00
#seasonal-business#cash-flow#operations#family-business
teardown36:00

HEB: What Long-Term Family Ownership Actually Buys You

Girdley's favourite business to admire is HEB, the largest private grocery chain in America, 85-90% owned by Charles Butt and relatives with a slice held by employees. He argues its behaviour is downstream of that ownership structure: no public shareholders forcing quarter-by-quarter thinking, so the company can make decisions on a seventy-year horizon. His two anecdotes: flying senior executives to California when Trader Joe's announced a San Antonio entry and telling them not to return without the best of every competitor product, and simply lowering profit targets when Walmart arrived.

  • 85-90% owned by Charles Butt and family; employees hold a slice.
  • Operates at 3-4% EBITDA margins and takes pride in the optimisation.
  • Trader Joe's response: private jet to California, don't come back without the best of every product.
  • Walmart response: lowered profit targets outright — 'we're not losing to Walmart.'
  • No public shareholders means seventy-year thinking rather than quarterly thinking.
  • Retention is extreme — Girdley's friend was called 'the new guy' for ten years.

“you have these folks that were thinking like we've been here for 70 years how are we going to be here for another 70 years…”

Michael Girdley · 37:30
#retail#family-business#long-term-thinking#competition

insight· 4

insight24:30

The Associate Programme: An Entrepreneur-in-Training Pipeline

Girdley hires people he calls associates into what amounts to an entrepreneur-in-training programme. He pays them a salary and mentors them through what he describes as the twelve bad ideas every entrepreneur has at 27, then works on a good idea with them. At the end they can either start a company with him or leave for a job. Hayden and Franco came through this pipeline and built hirewithnear.com, with Girdley on the cap table having done, by his own account, almost none of the work.

  • Associates are salaried and mentored rather than recruited into a fixed role.
  • Explicit function: help them get through the twelve bad ideas every 27-year-old entrepreneur has.
  • Exit options are deliberately open — found a company with him, or take a job elsewhere.
  • Near (hirewithnear.com) came out of this programme via Hayden and Franco.
  • Girdley calls Near 'the apex of Girdley automation' — substantial cap table position, essentially no work from him.
  • Origin insight: nobody in his CEO peer group could hire, and none knew how to hire overseas.
  • Three of his six associates work overseas and he has never met them in person.
  • CEO compensation ranges widely — a 27-year-old at $60-80K plus benefits, versus a coffee operator with 25 years at Circle K; equity from 5% to 40%.

“i help them like get out of the like 12 bad ideas that every entrepreneur has to get when they're 27 years old”

Michael Girdley · 26:00
#talent#mentorship#incubation#hiring
insight29:30

AlleyCorp: $300K and Six Months to Test an Idea

Sam recounts Kevin Ryan's model. After DoubleClick — where he was employee ~30, became CEO, and the company sold for billions before becoming Google's AdSense — Ryan started AlleyCorp with his partner Dwight. The premise: all the ideas come from them, backed with roughly $200-300K and six months to prove good or bad, and they hire someone to get each one off the ground for a small slice while retaining most of the equity.

  • All ideas originate with the founders, validated only on back-of-envelope math.
  • Each venture gets ~$200-300K and six months to prove itself.
  • An outside operator is hired to run it, taking a small portion of equity.
  • Successes include MongoDB (a $20-50B public company), Business Insider (sold ~$600M), Gilt Group and Zola.
  • Idea sourcing is casual — Ryan got Zola by asking people at a wedding where they bought the gifts.
  • Shaan contrasts it with startup studios (Mark Pincus, the Uber founder, Kevin Rose), which he says have had a poor track record.
  • Girdley's reaction: 'Speechless. That's impressive.'

“we're going to fund companies with 200,000 and all of the ideas are going to come from us ... we're going to give it 300,000…”

Sam Parr · 30:30
#venture-studio#incubation#holdco#idea-generation
insight40:30

Businesses They Admire: Mineral Rights, PopSockets and Black Rifle

The hosts trade examples of businesses they admire for being unexpectedly simple or profitable. Shaan's is Mike Brown's mineral-rights business — knocking on doors in Texas to buy land rights from families sitting on deposits, then flipping clean title to oil companies without ever drilling, reportedly generating multiple eight figures in annual profit with about eight people. Girdley's is PopSockets, a patent on a phone grip that turned into roughly $200M revenue and $90M profit in 2018. Sam's is Black Rifle Coffee, effectively a lifestyle brand with a coffee counter attached.

  • Mineral rights: acquire land rights door-to-door, flip clear title to oil companies, never drill.
  • Multiple eight figures of annual profit with a team of roughly eight.
  • The founder makes every hire take up cycling so the team can ride for two hours mid-day.
  • PopSockets: 30,000 units in 2014, 35 million by 2017, 60 million in 2018 — ~$200M revenue and ~$90M profit, all resting on a patent.
  • PopSockets was founded by a UC Boulder professor and is highly litigious about the patent.
  • Black Rifle Coffee sponsors rally cars and mountain biking 'because it's freaking awesome'; taken public at ~$600-700M.
  • Shaan's takeaway from Mike Brown: 'find the people that you love and you do life with them.'

“my philosophy is you find the people that you love and you do life with them”

Shaan Puri · 42:00

“supposedly in 2018 they had 200 million in revenue and 90 million in profit all cuz of a patent”

Michael Girdley · 55:00
#business-teardown#profitability#lifestyle-business#moats
insight43:30

Bill Simmons and the Case Against Objectivity

Shaan's second admired example is Bill Simmons. Where sports journalism demanded objectivity, Simmons asked why he should pretend — he followed sports because he loved the Red Sox and Celtics. So he wrote as a die-hard fan: euphoric in victory, sky-is-falling in defeat, which was exactly the reader's own experience. He then broke the second rule by refusing to stay in his lane, writing crossovers like ranking NBA players as Die Hard characters and podcasting about MTV's The Challenge. Shaan's point is that no plan could have projected this into a ~$200M Spotify sale.

  • Rejected journalistic objectivity in favour of writing as a partisan fan.
  • The fan perspective was inherently relatable because that's who the reader was.
  • Took risks nobody else took — NBA players as Die Hard characters, niche Challenge podcasts.
  • Niche topics score high emotionally: when it hits, it hits very hard because you're in on the joke.
  • Was podcasting before podcasting was an obvious thing to do.
  • Sold The Ringer to Spotify for around $200 million.
  • Shaan's principle: put a bunch of cool things in a hat, mix it, and something good comes out — without a map.

“there was never really any plan you could draw up how that podcast was going to make the guy 200 million someday”

Shaan Puri · 45:30
#media#personal-brand#content-strategy#differentiation