Adam Ness

De Novo & Renova Builds at Barchee Holdings.
Catholic, Lean, Future, GTD, Fly Fishing.
Not investment advice.

[Pope Leo XIV @Pontifex]

Humanity, created by God in all its grandeur, is today facing a pivotal choice: either to construct a new Tower of Babel or to build the city in which God and humanity dwell together. In Jesus Christ, this humanity in its grandeur becomes the Way, the Truth and the Life, opening the path for each of us to grow toward fullness. #MagnificaHumanitas
https://t.co/6i9MWs6LJl

[Pope Leo XIV @Pontifex]

As evidenced by the unbridled promotion and implementation of technology at the expense of human dignity, we are truly experiencing an eclipse of the sense of what it means to be human. It is imperative to recover an understanding of the true meaning and grandeur of humanity as intended by God. It is in this sense that the challenge we currently face is not technological, but anthropological, and it is my hope that the Encyclical Letter to be published within a few days will contribute to answering this challenge.

[Adam Ness @AdamNess_]

@adept_smb It's difficult to describe just how much better you become after sitting behind the driver's seat as an operator for a year or two. There's knowing how to model NWC and then there's surviving your first cash crunch.

[Adam Ness @AdamNess_]

@sourcesandmuses Clear process first-->then software.... Or you'll have to re-do the implementation (ask me how I know)

[Austin Rief ☕️ @austin_rief]

We are in the golden age of AI.

Go thank a VC near you.

A $200 monthly subscription to Claude can consume $5,000 in compute.

This reminds me of when I was in college and Ubers were $3.

[Adam Ness @AdamNess_]

@SMB_Attorney LOI

[Adam Ness @AdamNess_]

@newstart_2024 The Industrial Age Knowledge Worker is of declining utility.

The bigger question is what kind of human comes next.

[Jawwwn @jawwwn_]

Peter Thiel on who is most likely to lose their jobs to AI:

"It seems much worse for the math people than the word people.”

[Will Manidis @WillManidis]

https://t.co/bHkcSotj3b

[Adam Ness @AdamNess_]

@WillManidis What an amazing line: "it convinced an entire generation of smart and secular people that they could calculate their way to moral seriousness without ever touching the formations"

[Adam Ness @AdamNess_]

As AI absorbs procedural work, what’s left isn’t intelligence but formation.

We’re leaving the Third Industrial Revolution (Information Age) and reentering a new period where judgment, virtue, and order become the differentiators

[Matt Shumer @mattshumer_]

https://t.co/ivXRKXJvQg

[Adam Ness @AdamNess_]

@Slackwatercap That’s why we’ve leaned into De Novo: no entry multiple, intentional culture, capital deployed into growth.

Harder path. Less crowded

[Ben Bortner @Slackwatercap]

Yesterday I announced to our investors that Slack Water Capital and our affiliates will no longer be allocating to new self-funded search opportunities.

This decision is based on my belief that the environment for self-funded searchers, and self-funded search investors particularly, has deteriorated significantly since I first came up with the idea to launch a fund 3 years ago.

While I still have a deep respect and admiration for the self-funded search model, having been a successful self-funded searcher myself, I believe the opportunity set today is no longer as attractive as it was even just 18-24 months ago for the self-funded search investor.

When I first started investing in this space, the opportunity set was very different. High-quality businesses with recurring revenue, low customer concentration, and $1 to $2 million of EBITDA could routinely be purchased for 3-5x. Competition for these deals was relatively limited. They were too big for the average buyer but too small for most private equity.

Today, there are far more buyers chasing these same types of SMBs. Private equity firms and their portfolio companies have come down market; family offices have proliferated and are looking for uncorrelated long-term holds with strong cash flow yields; and there is an exponentially growing number of aspiring ETA entrepreneurs looking to get in on the perceived gold rush.

The results are predictable.

Valuation multiples for quality businesses with $1 to $2 million of EBITDA have expanded materially. Deals that once traded at 3 to 5x, now routinely sell for 6 to 8x...and sometimes even higher! The 70-80% SBA loan, 10-20% seller financing, and 10-20% equity self-funded search model of the past simply doesn't work at these valuation levels.

Thus, the self-funded searchers, on average, are left picking through the scraps left behind by other more experienced and better capitalized buyers.

These scraps are typically the lower quality businesses with high customer concentration, greater economic sensitivity, more project-based revenues, greater key-person risk, and/or more operational complexity. And valuations for these businesses have moved up as well. These are primary types of businesses that are trading for 3-5x today.

I do think there are still some opportunities in the sub $1 million EBITDA range for self-funded searchers. However, it is really hard to deploy a meaningful amount of capital into these smaller deals due to a small total equity check and the SBA's 20% ownership threshold. While these can be good opportunities for searchers and individual investors, they don't really move the needle for a fund.

The typical self-funded searcher profile has also changed. The self-funded search model has been heavily marketed and romanticized on social media and podcasts. As a result, it now attracts a much wider pool of people than it did in the past. Many of the new crowd are not as well equipped to perform what is essentially a leveraged buyout of an incredibly fragile small business.

Many of these new buyers underestimate how hard it is to successfully operate a small business while also servicing a significant amount of debt. They underestimate just how savvy the current business owner is, how hard they work, and how many roles they fill on a daily basis. Many searchers think they are buying passive income and can operate from behind a spreadsheet.

Nothing could be further from the truth.

Finally, when I started building Slack Water, there were only small handful of funds or larger investor groups focused on investing in self-funded deals. At the time, I felt like I was filling a real gap in the market. However, I no longer believe that to be the case.

There are now dozens of funds and investor groups targeting the space. There was a period of time in 2025 where it seemed like there was a new fund focused on self-funded searchers being launched every week.

In my opinion, there are just not enough "large", high-quality, self-funded search deals for all these funds to deploy that much capital in this space unless everyone is going to write a lot of $50k-$100k equity checks. And how much due diligence can you perform, and impact can you have post-closing, across 100 portfolio companies?

This flood of new capital, and shortage of quality deals of size, is naturally causing these funds to compete for what limited deal flow there is. This competition is naturally pushing investor terms in an unfavorable direction. Less governance. Less downside protection. More aggressive structures. Higher entry multiples. Less equity participation.

In my opinion, the combination of these 3 changing dynamics is not a great recipe for future returns for the space as a whole...

Yes, there will still be exceptional operators who find those needles in the haystack, build great companies, invent innovative capital structures, and achieve extraordinary outcomes through self-funded search. I believe that strongly.

However, in my opinion, returns for the "asset class" as whole over the next 3-5 years will likely not be what they were over the past 3-5 years.

Rather than force capital into what I believe is a deteriorating environment, I believe the disciplined decision is to step aside.

Personally, I've also discovered that I actually enjoy operating more than I enjoy being a passive investor. I enjoy the messy process and challenge of building something. The daily battles that inevitably popup. And, selfishly, having the final say on strategic direction.

As a result, going forward Slack Water will focus on building our own platforms and explore new ETA models while remaining open to opportunistically investing across both private and public markets.

[Adam Ness @AdamNess_]

I’ve been calling this the Formation Age.

As AI absorbs procedural work, what’s left isn’t intelligence but formation. We’re leaving the Information Age and reentering a period where judgment, virtue, and order matter again.

The tragedy is we’ve dismantled the institutions that once formed people well. The purpose of education, work, and community will need to be rediscovered, not optimized.

[Pope Respecter @poperespecter1]

Gen Z is the first American generation to have more Catholics than Protestants.

[Brett Adcock @adcock_brett]

Robotics

[Adam Ness @AdamNess_]

@GrantHensel “We'll see a counter-movement arguing that it's better to Build than Buy, actually” That’s unironically me

[Adam Ness @AdamNess_]

We’ve starting using Danaher’s Core Value Drivers to anchor how our companies define weekly KPIs.

It’s been great, and helped the PortCo leaders think bigger.

Example from our utility contracting platform below 👇

[Reg Zeller @RegZeller]

I can’t agree with this more. Sean and I talked about this a few weeks ago and I didn’t tag him in something similar. During ZIRP when everything was up and to the right it was easy. Then the world gets hard from both internal and external forces … woof

If you enjoy chewing glass, get into this. Some of us just can’t fathom anything else. But it’s going to absolutely suck way more than it’s great. It’s not the BS these influencers peddle about passive income or easy.

But also, I can’t do anything else. I love it