Scaling with Intention: Lessons in Leadership and Growth | Bob Carlson and Michael Burcham

Michael Burcham: Welcome to Microcap Moments, a podcast from Shore Capital Partners that highlights the stories of founders, investors, and leaders who have taken on the challenge of transforming ideas and small companies into high growth organizations. The journey of building and scaling a business takes one down many unexpected paths. It’s a journey where we learn from our mistakes fall down often, but have the entrepreneurial grid to pick ourselves up and persevere.  

Within this series, we will share these stories of success and failure of the challenges and the rewards faced by those who dare to dream big and through their lessons learned we hope to inspire others who are on a similar journey of becoming, growing and leading.  

Anderson Williams: In this episode, I talk with Bob Carlson, an Operating Partner at Shore Capital, and Michael Burcham, the Chief of Strategy, Research, and Talent Development about their experiences as board members at Point C, a Shore Capital portfolio company that recently completed a successful recapitalization. Bob talks about his role not only in clarifying the early investment thesis in the third party administration of benefits space, but in identifying and making the introduction to what would become the founding platform partner.  

Bob and Michael, describe how the company, the executive team, and the M&A partnership strategy evolved over the hold period, and how an effective board member must also evolve. 

They offer some sage wisdom for first time board members to help them set their executive leaders. And companies up for success.  

Finally, Bob and Michael talk about their passion for entrepreneurship and the messiness and even the innocence of a startup and how they use their coaching board service, and personal investments in early stage companies as a tool to keep their own sword sharp and their insights current. 

Well welcome gentlemen, and just to get started, will you just introduce yourselves and say what you do here with Shore? Bob, maybe you can kick us off.  

Bob Carlson: Yeah, Bob Carlson, I’m an Operating Partner here at Shore.  

Michael Burcham: Michael Burcham, Executive Partner and Chief of Strategy, Research, and Talent Development here at Shore. 

Anderson Williams: So, Bob, will you give us a little bit of your background in healthcare and the employer benefit space? I know that’s part of where you got connected with Shore, but can you just provide a little background?  

Bob Carlson: Sure, in the late nineties, I was fortunate to be on the founding team of a healthcare tech startup called Healthx, where we built, uh, member portals and provider portals to bring information from the payer to their constituents. 

And to build that business, we had to learn the needs of a broker and an employer and a member of a health plan and a provider for their information. So it forced me to kind of understand all the different aspects and over time we then gathered the data from all those payers, initially TPAs, then also health plans, and many vendors came to us wanting that claims and eligibility data. 

So I also was able to understand a lot of the vendor ecosystem in employer benefits. But one thing I always enjoyed was the entrepreneurial spirit of A TPA owner. It was always fun for me.  

Michael Burcham: And Michael, is that how you guys got connected, initially? It was a former colleague of mine and the founder of Healthx had been partners in an earlier business. And when Healthx was beginning to scale, I was asked to come in and facilitate a strategy and growth session with Bob and the team. And I won’t date us too much, but that was more than a few decades ago and we’ve remained friends ever since.  

Anderson Williams: And how, Bob, did you come to connect with Shore? You were obviously in the tech space and that’s not Shore’s, bread and butter. 

How did you get connected with Shore?  

Bob Carlson: So Greg Bell, who started Healthx, was on the Navi board at Shore, and Ryan Kelly reached out to Greg and said Shore was looking at the uh, medical benefits thesis. Was there anybody that Greg knew that might know that space? And Greg suggested me and we connected and that’s how I found Shore. 

Michael Burcham: Many of these TPAs, Anderson, worked in a very regional, local way and often were started by business colleagues helping other business colleagues. So it’s a community centric type of business and we, I think we realized as we began working on this thesis at Shore is that we could help connect many of these smaller regional businesses to create something that would operate much better at scale. 

And Bob had known so many of these smaller TPAs that he was a natural fit on the board and opened the door to many introductions for us in the early years of the company.  

Anderson Williams: And you knew those two TPAs as prior clients are part of that, your Healthx experience.  

Bob Carlson: They were clients of ours at Healthx, and one of the things I observed was many of these TPAs had a specialty in a given area, and then weaknesses in other areas. 

It’s a operationally complex business, so being able to kind of combine some of those different levels of expertise and strengths and weaknesses was attractive, I felt, to building a great overall business.  

Anderson Williams: And one of those was in Eau Claire, Wisconsin, and that partner ended up becoming the founding partner of Point C, will you just talk about what it was about that business and why that seemed like a good opportunity to start this new platform?  

Bob Carlson: Yeah, so Ryan Kelly and I were looking at different opportunities for the platform investment and Ryan called me one day and said, had I had heard of BPA in Eau Claire and I said they had been a client of ours for several years at Healthx. So Ryan and I made a trip up to Eau Claire and the discussions progressed from there and it turned out to be a great partnership with the team there.  

Anderson Williams: What is it about this space? Michael, maybe you first, and then Bob, you can add what you like, but what makes this an interesting space for Shore, from an investment perspective? 

Michael Burcham: Well, I think three or four aspects I would highlight and then Bob, feel free to add. 

One, it is a recurring revenue model business, meaning there’s usually a monthly subscription tied to the work, and that is a very attractive business model for investors, particularly in private equity to look at.  

Second, is the relationships are actually rather sticky when you are serving an employer and their employees. Well, no one wants to disrupt that process. So once you get a business relationship and you serve it well, it’s yours to lose by not paying attention to your customer, but if you serve them well, you get to keep the customer for years at a time, which was also very attractive. 

I think the third I would bring up before I turn this over to Bob is, Bob mentioned earlier, it’s an operationally complex business. Not everyone can do every facet well, but a number of the partners we brought in did one thing well and someone else did something else well. And when you put those best practices together, we could create a very strong business that had many points of difference, not just one or two, and could be a really strong, formidable competitor in the space. 

Bob Carlson: I’d say also, Anderson, one of the things I found being a vendor serving this space was it was very expensive for us to serve each of these individual businesses who all did things slightly differently. And as we would see some of those businesses combined, it was more efficient for us to deal with a larger organization. 

And so those scales of economy that you get and better pricing also that comes along with that for the vendors, just builds a better relationship between the vendor and the customer. In this case, the TPA being the customer.  

Anderson Williams: I wanna go back to that conversation initially about BPA in Eau Claire, and just curious, from your recollection, what made that seem like the right partner? What was it? You knew a bunch of different teams around the country, people you’d worked with in a lot of different ways. Why did that one stand out to you?  

Bob Carlson: I felt, uh, BPA was representative of the localized TPAs and benefits often in these employers from 50 to several hundred lives. It’s a very local business. 

The local hospitals, they usually have one location in that, or two locations in that geography. So I felt BPA was representative of what many other TPAs were in different geographies. Also BPA had some unique assets I felt in a relationship with the Mayo Clinic over in Minnesota in a certain county. So there were a couple things that they did I felt were a little different that we could learn from and leverage potentially as we would find other TPA partners in the industry. 

Michael Burcham: I think also we discovered that BPA was looking to grow and recognized that they needed some skills and expertise beyond what they had cultivated themselves. So it wasn’t a resistance. Great, just like we are. It was a recognition that the employer space was increasingly becoming more complex, and in order to compete effectively, BPA would need to up their game with better process, better technology, smarter ways of working, and, uh, that openness to try new things and to scale really made them an attractive way to start Point C. 

Anderson Williams: So just to maybe elaborate on that a little bit, Michael, when you think about that transition from BPA to the founding platform of Point C to that first year of platform at Point C, talk a little bit about what that first year is like in launching a new platform, and particularly at Point C. 

Michael Burcham: So in Shore style when we launch a platform, the management team is relatively small. It includes the founders from BPA and three or four folks that we have brought in. Usually someone managing finance, we brought in a CXO or a Chief of Staff, Mark Larson, who probably wore eight different hats that first year. Putting things together. It took a bit to get the right CEO hired.  

So I’d say the first year was really about mapping out the journey of what we wanted to achieve. This platform closed and at the height of COVID, we all went to Eau Claire did all the social distancing. We were in a ballroom setting, six and eight feet apart. 

I remember working on where we wanted to take this company, but it was very aspirational that first year, and everyone was working hard on the very basics to get the infrastructure put together. As the company scaled over the next three or four years and more partners came on, the management team grew specificity and really knowing how to expand products. 

We got much smarter about how we managed data. We got better at how we identified a single best practice, and all began doing it that way. So rather than having seven partners with seven versions of ways of working. We were able to begin to identify one best way of working. And that brought not only massive efficiency, but terrific expertise to each site that they’d not really had before. 

And that collaborative spirit helped other partners learn from one another. And that really, as we began to think about a recap, made this company an ideal target for a next wave of growth because they had really shown how to both identify points of difference, build in best practices, and prepare themselves really for massive growth. 

Anderson Williams: And Bob, as you think about Point C’s, growth and success, you were there from the beginning all the way through recap. How would you summarize the secret to their success? Especially as you think about the Shore portfolio?  

Bob Carlson: Yeah.  

Anderson Williams: Which you’re familiar with. What’s the secret to Point C’s success.  

Bob Carlson: We had great owners who stayed with the business for many years. 

We also then over the years, built a great corporate team who I felt was able to scale that business in every aspect of the business. And then we built a strong M&A motion that was always looking for an A team. They’re identifying new opportunities for partnerships in this space. And I’d say one of the exciting things for me as a first time board member at Shore was seeing that Shore playbook unfold over those years and how methodical, starting with the strategy work that Michael and the team did leading then through building the corporate team and each function. 

And it was fun to watch.  

Michael Burcham: Anderson, also something Bob and I got to witness firsthand at the board is that many of the companies when they were independent and smaller, would outsource functions ’cause they had neither the time nor expertise to do them. From reporting to technology to care management, utilization review. 

As we grew, we were able to bring those different outsource services in-house so that we could be more directly engaged with the customer in all aspects of their job and our early CXO, Mark Larson grew into our Chief Operating Officer role, but what was most impressive is he really helped us bring those products in house. 

Expanded the margin, which was wonderful, but I think more importantly allowed us to really serve the customer from every dimension of need without hoping we knew what the vendor partner was doing. We knew exactly what was going with the customer, ’cause our own team was doing it. And I think that really positioned the company well for scale and success. 

Anderson Williams: I’m curious for either of you who can jump in on this, but how did, from those early partners through the hold period, and then toward recap, how did the thinking about new partners change? Or did it change in terms of what made the right partner, what made the right next acquisition? Just any thought on the evolution of that from your perspective. 

Bob Carlson: Yeah, I would say initially, and I’m fortunate, John Vujovich, who leads the M&A team for Point C is in Indianapolis with me. So John and I get to talk, uh, almost every day. And in the early days, we were known as we were buying the small TPAs in the industry and compared to other private equity firms who were in the space and as Point C grew, our reputation grew. 

And our ability, and now after the recap, the ability to do larger and larger businesses is, I think really it’s been fun to see that evolution as the sophistication of Point C has grown and our ability, but still the ability to do a small business, so can kind of meet people where they are and being able to, uh, do a transaction. 

Michael Burcham: I think also Anderson, the story of Point C as we evolve, the company attracted different kind of partners. Even starting with the name, you know the name Point C is derived from the fact that most TPAs help an employer go from point A to point B. We go one step further to Point C. 

That resonates with individual partners. When we talk about how we really want to be serving our customers and providing that employer and their employees along with their broker exceptional experiences, knowing that was our why and having really great values, allowed us to really interview particular partners that we were looking at to how well those values matched their values and when that alignment happened, it was an easy call.  

Early on, we set out three to five key strategic initiatives we wanted to accomplish. Every new partner heard about those initiatives before they joined us, and they knew what they were signing up for. And if that didn’t resonate, they weren’t going to be a good fit and if it did resonate, they’d be a great fit for us.  

And we never departed from those strategic initiatives. And it. Every board meeting they were reported on where we were, how we were progressing, what we had learned from the market about that, that might need a small adjustment, but we never deviated from that original vision of creating a full service TPA deeply grounded in expertise that served equally well, the broker, the employer, and the employees and their families. 

Anderson Williams: How would you guys, aside from EBITDA and just scale or headcount, how would you describe the difference for anybody listening who may be in an early stage company, how would you describe the difference between that first year version of Point C and that ready for recapitalization version of Point C? 

Again, aside from EBITDA and the obvious things that have changed, what are some insights between that early stage and that more mature, ready to recap company?  

Bob Carlson: I would say the level of sophistication in our processes and building centers of excellence within the organization so that you can really leverage the talent among the teams. 

You know, we would find among those functions within the individual TPA strong employees who knew that, and being able to share those best practices across the organization. And then over time, having a corporate team that could facilitate that. ’cause all those people are busy doing their day job.  

But I also did wanna mention, I think in the early days, the resources that Shore was able to bring to support us was, I think very, very helpful and really stood out to me having worked for other private equity firms in their portfolio companies, that I felt was a difference maker to kind of have you those, those people assisting you in various functions of the business who had done that before, and who understood Shore’s Playbook as opposed to being an outside consultant coming in but we were able to help us with that.  

Michael Burcham: You know, Anderson’s scale and readiness to scale comes from having the right people, the right processes, and really powerful enabling technologies. I would say one of the things that really stood out is Point C leveraged the entire Shore playbook. From how we did acquisitions to how we added products to how we thought about this sales funnel, I was super privileged to serve as a Lead Independent Director for the board. 

And so even as board members, we were able to lean in and offer our own insights and lessons learned that would help the team scale quickly without repeating the stakes we had all made in the industry. And I think that made a massive difference because the board was deeply engaged in the success of the company, not just at the board meeting, but almost on a weekly basis, interacting with the management team, helping with introductions, helping share, here’s what I’ve learned. 

Don’t repeat my mistake, go make a new one. Here’s a new technology I’ve seen that might be helpful. And all those things together in a collaborative environment, it just screams success.  

Anderson Williams: And given that Michael, and then Bob, I want you to think about this as well. What advice then, would you give a first time board member in an early stage company to build toward that kind of success, to support that kind of early stage reality and that evolution over a five year hold period? 

Any advice you would offer a a first time board member?  

Michael Burcham: Oh my gosh, yes. So let’s begin with this.  

Anderson Williams: Another podcast we’ll say,  

Michael Burcham: or a whole book. Um, everyone in that room management, the Shore team, other board members have stories and expertise. Never assume, get to know everyone that’s gonna be in that board meeting, what expertise they bring their stories. 

By really understanding your colleagues in the room and what they bring to the party, you really get the network effect that Shore talks about so often because it’s not just about what you know, it’s putting together what you know with everyone else’s knowledge in the room. That creates a really powerful combination. 

I say the second advice I would give a first time board is lean in and listen. Understand the problems from the customer point of view or the stakeholder point of view. In this case, the broker, the employer, the employee, the employee’s families and interpret what you wanna bring to the party through the lens of those stakeholders. 

Rather than simply giving advice, offer insights from your own lessons learned that could really help us provide the absolute best experience for each of those stakeholders. I think if first time board members do that and avoid advice giving and just focus on experience share that helps stakeholder engagement, you win every time. 

Anderson Williams: Anything you’d add, Bob?  

Bob Carlson: The time I spent between board meetings with the team was always very helpful for me to then add value in the board meetings. And even if someone like me had spent that time in the sector, every business is different, every team is different. So that really was beneficial as I felt, uh, I interacted with the team. 

The other thing I found is at Point C, we didn’t build, we didn’t add an IT corporate function or an HR corporate function till years into that hold period. So I think where a board member has a specific functional expertise too, it gives you an opportunity to help the revenue side or the operations side, or the HR or the technology side of a business. 

So I think that’s another way a board member can, uh, contribute.  

Anderson Williams: Certainly being a little bit more hands-on than one might think early in the hold.  

Bob Carlson: That’s what I felt.  

Michael Burcham: Right. I would say the final thing for a first time board member at Shore, particularly to really understand is Shore has a 15 year history of processes and playbooks and how the work gets done. 

Get to know that Shore process really well and then fuse that with your knowledge, because if you follow what we know is a proven model at Shore and infuse your expertise into that process. The outcome will be so much better than if you simply offer advice or insight in a vacuum without understanding the 15 years of experience across over 20 exits we’ve had at Shore. 

Anderson Williams: So when you all look at Point C today and really look at the broader industry, what’s your outlook on the sector, whether that’s for Point C or broadening the opportunities for Shore? 

Michael Burcham: Sure, I think the outlook is very strong because employers recognize that the relationship with their team has to be more than a job. And one of the ways you show your team, they are valued is how you support them and their families, particularly in times of crisis. And one of the most powerful ways to do that is through health benefits.  

Knowing that employers also recognize that costs are escalating, so finding ways they can offer really great benefits for their workforce, but in a way that they can afford is tailor made for a TPA environment because it allows organizations like Point C to design and almost a custom way what that employer and their workforce needs, depending if they’re hiring younger, 20, 30 year olds, or if their workforce happens to be an older generation of 50 to 60 pre-retirement age.  

Those two groups need things that are fundamentally different. There’s no one size fit all and health benefits. And I think the outlook is strong because groups like Point C allow an employer to tailor a benefit to the workforce they are looking to attract.  

Anderson Williams: Anything you’d add, Bob, just in terms of Outlook. 

Bob Carlson: In healthcare, as we all know, it’s very complex and expensive to all the participants. So the ability for these third party administrators to be able to provide that tailored experience at the member level, those employees of that employer, giving them that often brings a lot of value and helps them make better decisions, helps ’em spend their money more wisely. I think that’s one of the things that is a bright spot in the industry.  

Michael Burcham: And Anderson Bob’s comments are backed up by the last several years of market data trends where we see the number of self-funded employers growing exponentially, and the number of employers simply looking to buy insurance from an insurers actually shrinking as a percent. So there’s a very bright outlook for this sector of healthcare.  

Anderson Williams: Well, I can’t help but think about as listening to Bob, you summarizing what you were saying is, you know, it’s simplified, it’s better choices and it’s a better experience and for the consumer on the other side of that, and if my employer enables that, that’s a powerful reason to stay committed or engaged with an employer. 

Michael Burcham: Absolutely so true.  

Anderson Williams: So both of you all are also investors in early stage startups and, and Bob, early in the conversation you mentioned how you love the entrepreneurial space. You’ve been an entrepreneur, obviously in your tech experience as well. Talk to me a little bit about that drive and that spirit and that enjoyment of the early stage messy entrepreneur experience. 

Bob Carlson: I started my career at IBM, and after 10 years in the mid nineties, I went to work for a startup in Chicago. I remember after two years there, I came to my wife and said, boy, you know, we went through our money. I think I’m gonna be out of a job. And I was expecting her to kind of be upset. Why would you leave the safety of IBM? 

But she knew I love that job. And she said to me, you only get two more of these. And so to this day, she still denies saying that, but so that’s, you know, kind of why I’ve been on this journey, uh, hanging out with, uh, those smaller businesses. And when we were at Healthx, when we grew from a few employees up to over a hundred, the thing that really enabled that growth in that scale were two subsequent private equity partnerships. 

So I saw the. Value that private equity could build in partnering with a business. But I also enjoyed those early days. So these days, in addition to my work with the teams at Shore, I also am a partner in a early stage angel network called Start Something Ventures and then do some board and advisory work. 

Anderson Williams: What about you, Michael? What do you like about the entrepreneurial journey? You obviously have done it yourself, you coach a lot of people, you invest in a lot of people. Just talk a little bit about that for you.  

Michael Burcham: So Anderson, I love the absolute innocence of startup culture where anything is possible. No one’s saying, we tried that before and it didn’t work. 

They’re looking to disrupt a marketplace. They bring new ideas, new ways of thinking, new technologies, some of which I’ve never heard of. And all that insight helps me be a better investor, a better board member, a better leader at Shore, because at the scale and size of companies we work with, making changes like that can be harder and slower. 

So it feeds the innovation side of my brain to see what younger companies are doing. I get to bring that back to Shore, and while we can’t do everything we see in hear, it really begins to seed some thoughts for us about what we might do instead.  

When we started Shore, we stayed away from anything that smelled too much like technology. We wanted to play pure service. Today, we’re deeply immersed in tech enabled services and how our companies can use ai. That transformation didn’t happen because we were insular and sticking with what we’d always done. It was because we looked outside at younger companies. Saw what they were doing and the traction they were getting and saw how to bring that inside Shore. 

I think that’s one of the reasons we started our search fund. It’s a group of younger, brighter, thoughtful entrepreneurs who aren’t afraid of failure or excited to try something new, and they offer a laboratory of learning for us at Shore that I think helps differentiate us from other PE firms that don’t have that. So. I’ve invested in startups for probably 25 years. I don’t think that’s going to change.  

Is it? High risk? Sure. But I will tell you it’s super high reward because the relationships I build, the insights I gain, and the occasional win is an adrenaline rush. Like nothing I ever experienced in any other facet of investing. 

Anderson Williams: So just to wrap up, I wanna bring a couple of these threads together. You guys have described, uh, your own interest and engagement in the entrepreneurship space, the risk and reward, the messiness, the innocence. So just to wrap up, any thoughts on how your entrepreneurial experience may be fits with the microcap space in ways that people aren’t necessarily thinking about it? 

Bob Carlson: Well, a couple weeks ago I was at an event in Indianapolis and somebody came up to me and said, Bob, I hear you’re involved in private equity. I’ve known you from startups. You know, what’s the real difference? And you know, they had had some kind of negative connotations about private equity from other people they knew. 

And I said, the best way for me to look at the microcap private equity space. Or really there as a growth partner is, think of it as a co-founder. You know, we’re there alongside you helping you in that business. And actually the benefit with somebody like Shore in the playbooks is you have 10, 20, 30 co-founders each with a different expertise. 

Usually co-founders, which most investors like to have multiple founders in a business, you know, kind of adds to, uh, the breadth of knowledge, but here you’re able to really do that on a larger scale. So that’s one of the ways I look at it.  

Michael Burcham: So Anderson, here’s how I would relate it most directly to Shore’s microcap space. 

Almost every founder we partner with at some point in their past was a startup. They believed in a vision, they had passion, and they muscle their way through with perseverance and grit. To create the company they have, and when we first meet a company that’s a partner candidate, for sure, my first emotion is just overwhelming respect because I’ve done that journey. 

I know how hard it is, their entire identity is wrapped up in that company. So it’s a big decision. I think because so many of us at Shore have walked that same journey, even at Shore, we did the same journey. I mean, we started with four young men who had a vision of creating a private equity firm that most people thought they would absolutely fail. 

And so even the journey of Shore is a startup of itself. I think because we have such respect for the founder and what they’ve created, we immediately connect and resonate on a scale that probably other private equity firms do not, and I think it’s why we’ve been voted the most founder friendly firm for over five years in a row, is we never forget the work it took that founder to get where they are. 

So we are deeply respectful of that process. So when we partner, it’s not about being dismissive of a founder, but being additive to and rather than building with continued just muscle and grit, we look at how we can help them scale their vision to be more than they ever imagined it could possibly be. With process, with technology, with people, with advisors and ideas that they’ve not even seen, that we bring from another industry for them to consider.  

And that collaborative environment that happens in a boardroom when you have the founder, the Shore team and outside board members all sharing insight and knowledge together. It’s an exciting cauldron of opportunity. And I think sometimes our bigger risk is not what’s possible. It’s learning what to say no to. So we pick a growth path that we can all achieve, and I find that to be an extremely exciting environment to work in. 

And it’s why I’m still here at Shore after 15 years on the job. 

Anderson Williams: If you enjoyed this episode, check out our other Microcap Moments episodes at www.shorecp.university/podcasts or anywhere you get your podcasts. Here you will also find our Bigger. Stronger. Faster. and Everyday Heroes series, each highlighting the people and stories that make investing in the lower middle market unique. 

This podcast was produced by Shore Capital Partners and recorded in the Andrew Malone Podcast studio with Story and narration by Anderson Williams. Recording by Austin Johnson. Editing by Reel Audiobooks. Sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.  

Special thanks to Bob Carlson and Michael Burcham. 

This podcast is the Property of Shore Capital Partners, LLC. None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security. See the Terms of Use page on the Shore Capital website for other important information.