Research: Supporting the Shore Investment Lifecycle

Anderson Williams: Welcome to Bigger. Stronger. Faster. the podcast exploring how Shore Capital Partners brings billion-dollar resources to the microcap space. In this episode, we’re talking about research and Shore Capital’s strategic investment in the research process, not just when considering a new market or a new platform to invest in, but to help our investment teams and our portfolio companies stay up to date and informed throughout the whole period.

I’m joined by Caitlin Zager.

Welcome Caitlin, and thanks for joining me today.

 

Caitlin Zager: Thanks for having me.

 

Anderson Williams: To get started, will you just introduce yourself and tell us about your current role, but also a little bit about your experience before you came to Shore?

 

Caitlin Zager: I’m Caitlin Zager. I joined Shore in January of this year, 2024, and I am leading the research function on the strategy team.

What that means is I’ll help provide the company specific research that’s required for strategy sessions, as well as providing industry trends and overview information for the broader industries that we’re invested in within Shore. So, food and beverage, industrial services, business services and healthcare. Prior to Shore, I spent more than a decade within the pharma and medtech industries.

I spent some time at Medtronic conducting primary research as well as using research to create new products. And then I spent time at Johnson & Johnson on the sales and marketing side, as well as the operations side there. So, it’s been nice to see what good research looks like, conducting good research, and then also what bad research looks like. So, you can kind of see both sides of that there.

Anderson Williams: Will you say more about that from a researcher’s eye? What does make for good research just at the top line and what makes for bad research? And when you’re thinking about using research as a business.

 

Caitlin Zager: Good research, I think, is research that helps answer a variety of questions, but really gets to why something is happening.

So it will really get to the foundational piece of what the trends are and what’s driving them. So that’s like in an ideal state. You don’t always get that. And sometimes you get research that creates more questions than answers because you don’t ask the right questions. And so, in order to get good research, you need to have a really thorough understanding of how it will be used.

And what objectives you’re trying to meet with that research. Otherwise, you kind of ask half the question and then afterwards, you’re standing here looking at it and saying, if only I’d asked the other half of this question, I would have a full picture.

 

Anderson Williams: And it seems like important to that and not to be simplistic, but you also have to be super clear on what question you’re asking.

 

Caitlin Zager: Yes.

 

Anderson Williams: Because otherwise, it seems like it would get really noisy really fast.

 

Caitlin Zager: It’s so easy to get noisy. It’s so easy to conflate two things, causation and correlation. It’s so easy to add in a different piece of a two-part question and then you’re not really sure what’s somebody answering. I’m sure you see that a lot as an interviewer.

 

Anderson Williams: Yeah, yeah, exactly. You ask two questions, and you get an answer to one or both or something in the middle.

 

Caitlin Zager: Or neither.

Anderson Williams: That’s right. That’s right.

As you think about the roles you’ve played and research has played in your previous work, what are some of the thoughts on how you see that? See it being particularly valuable now that you’ve stepped into the microcap space.

So you’ve come from healthcare, you’ve come from bigger companies like a Johnson & Johnson. Now that you’ve stepped into the world of microcap, how do you think about it? How do you see it differently than maybe you even understood it in your previous experience?

 

Caitlin Zager: I think in my previous experience, you needed the research to be airtight to be final.

And the piece that’s really exciting here is really building the plane while we’re flying it. You don’t have to use that metaphor. I think it’s exciting because you can use the research as a leading indicator and then you can test as you go. So, you don’t need to create all of the research once and then do this big reveal and then move forward.

You can do it in an iterative way. Why you can do a little bit of research and then maybe a few weeks later, a few months later, come back for another engagement and then learn more about the market in a way that helps you grow quickly as opposed to waiting for all the pieces to be in place to kind of set everything up, so it was executed perfectly.

 

Anderson Williams: It almost feels like in this space. You’re in the land of hypothesis and theory and testing assumptions, whereas maybe on that other side, you’re like looking for answers.

 

Caitlin Zager: Yes.

 

Anderson Williams: And because we’re entrepreneurial and we’re innovative and we’re iterating rapidly and we’re growing rapidly and we’re intentionally changing rapidly, there’s not likely going to be a one-to-one answer for what we’re looking for in research.

 

Caitlin Zager: Exactly. And so, it’s how can you ask the questions that give you an answer that allow you to move forward and then you can see how it reacts in the market. You don’t have to be a hundred percent certain. You don’t have to be a hundred percent right, but you have to be close enough to be able to move forward.

 

Anderson Williams: Yeah, that’s a really important clarification. When you think about research and you think about that context, will you just sort of step back up to a higher level and talk about the types of research you do and maybe some of the differences and how those different types of research can and probably should be used?

 

Caitlin Zager: I think if we take a step back, there’s two types of research in an overarching kind of sphere. You’ve got primary research, and you’ve got secondary research. And so, looking at primary research, that’s research that you’re conducting directly with the end user, the end customer, the end market. It’s research that you’re finding out for the first time.

And there’s two kinds of qualitative side and the quantitative side. And so, the qualitative side is typically in-depth interviews, focus groups, things of that nature. But why you would use qualitative research is if you want to understand why something is happening. So, if you are interested in understanding why does a particular provider of medicine refer to a different provider of medicine.

Or why does, you know, a certain type of manufacturing requires a certain type of, you know, packaging? That’s a great time to do that qualitative research. And the reason why you would do it in that way is you can kind of separate out what someone says they’re doing and then ask those follow-up questions that everyone’s always so hungry for.

So that’s why you would use qualitative. And usually, you did that earlier in the process. And then once you’ve kind of refined your understanding of why, and you want to understand how common is this, what are people doing across the board, what are the frequencies and trends that you can see across different types of people?

Then you would use quantitative. And that’s a survey that’s. You know that kind of methodology there where you would then send a survey to a hundred different people and ask them a variety of questions and then, you know, tease out the differences by persona type and things like that. So that’s on the primary side.

And then on the secondary side, the research that we’ll do is looking at industry market trends. So, looking at, you know, what is going on across the market, what is going across. the industry, what is going on across other industries that are maybe affecting those two pieces, benchmarking to understand what does good look like, what does bad look like for both the industry as well as like maybe a customer side of it, and then a competitive analysis to see kind of what the competition is doing there.

Anderson Williams: When you think about the primary and secondary and qualitative and quantitative. I’m just curious what mistakes you’ve seen people make in thinking through that sort of matrix of not just their research process, but how they’ve weighted results or interpreted results or misinterpreted results. Just any thoughts on sort of key mistakes you’ve seen people make in research or in using research.

 

Caitlin Zager: I think the most common mistake is talking to one or two people and assuming that that is what the industry does. And I think that’s so easy to do. You’ll talk to a trusted person, and they’ll say, you know, in my experience, I’ve seen this and you trust them, you believe them, but it’s always good to kind of trust, but verify. And that’s kind of where research comes in. So that’s, I think the first mistake that I’ve seen people make.

And the second is not using the right type of research for the right question. So, if you’re looking for a lot to understand, you know, what is the market doing, but you don’t yet understand. Why they’re doing what they’re doing.

You’ll never get why from a survey. And so, you can try to back into it, but you’ll always have that problem where you’ve maybe not asked the right question. You’re asking an incomplete question. And so, it’s the piece that you’ve got to make sure you’re using the right tool for the right job.

 

Anderson Williams: Because you can still have the data but be really guessing on the qualitative interpretation of it. Right? The why behind it.

 

Caitlin Zager: Yeah, and if you’ve got the data, but you don’t have the understanding of the pieces that go into the decision-making process, you can make some assumptions there that are maybe not right.

Anderson Williams: So, let’s bring that down to a real practical.

I know that you’ve been working recently. with an investment team here on some industry research without using any specific names or anything like that. Can you just walk us through what that partnership looks like? What was the goal? What are the process? How do you work with them? Just to take us through a real-world example of where your support can come in early when we’re evaluating an industry, for example.

 

Caitlin Zager: So, the investment team was looking at an industry that they were very excited about. This was within healthcare. And they wanted to understand what are the referral pathways within that industry and how do people find themselves within this practice type. And so, they wanted to understand who is doing the referring into this practice type.

And is there a risk that maybe like the referring doctors would say, you know, I can handle this. I don’t need to refer you. I can do it myself, which is always a real risk, I think. So, they had those kind of clear questions across the board. And so, what we did was we created a quantitative survey of 100 physicians, 50 who were referring and 50 who were doing it themselves.

And we asked them questions about their attitude, their awareness of their practices of medicine, and then how they felt about this referral pathway, whether they were referring or not. And what it really was helpful with was it helped us understand this provider set wasn’t actually the risk. The ones who are referring are referring happily to a different provider set and they’re only looking at a small subset of the population.

So, the rest of the population of patients, they’re not being treated by those physicians, and they’re not being treated by the referral pathway. So that group is really safe for where we wanted to help. So, it was nice to kind of help make sure that we knew who the right competition was, but then it also opened our eyes to understanding there’s a whole nother group over here that we need to be aware of.

 

Anderson Williams: I think what’s interesting about that, you’re asking something really specific about referral patterns to understand what is kind of an emerging industry where there’s not a lot of broad swath historical industry trends to be spoken to. So, sort of starting from the ground up by just saying, you know, brass tacks, basic, where does the business get generated kind of research seems like an important distinction as well.

Like in an emerging market, there’s not a lot of market research,

 

Caitlin Zager: Yes!

 

Anderson Williams: Right? And you can’t learn about that market as it’s emerging, unless you’re talking to and with the people in the market.

 

Caitlin Zager: Exactly.

 

Anderson Williams: Whether they even recognize they’re developing the market or not, you are asking about their perceptions, their reactions, their feelings about different things. That is defining the market at that stage.

 

Caitlin Zager: Exactly, and the other piece of it, I think, that is really interesting is if you didn’t want to do the primary research in this set, you could do secondary research by looking at guidelines, by looking at kind of published practices. And that’s where the team started.

And unfortunately, there wasn’t anything there. And so, the secondary research is always a great place to start that it helps inform the primary research. You don’t want to start with the primary without having any information in the background.

 

Anderson Williams: So that’s on the early end of identifying a market that we’re interested in investing in.

And so, then we go through the process of identifying we like that market, we partner with some businesses, what we call planting, growing, and harvesting stages of the business while they’re a part of Shore.

Can you talk about how research evolves or can have different meaning along the different eras of a business?

 

Caitlin Zager: Yeah, if you think about it in those three different kind of distinct life phases, if you look at planting, some of the pieces that are really helpful are understanding the market. So, understanding, you know, what’s your competitive set? What are your ideal geographies? What are your customers doing? What are they thinking? Where are they going?

And that is where you can get some great secondary research if the market’s already developed or you can get some great primary research by talking to customers, by talking to people who decided not to be your customers and working together in that. capacity. We’re really helping answer the question of what does that world look like?

And that also I think then can help inform what are the other companies that need to join that platform? Where are the gaps that you have in what you’ve got already in the platform and where do you need to go find someone else who’s already doing those things well to plug in to create a better offering for your customers?

 

Anderson Williams: So, like, that idea of ancillary supports or economies of scale or what those gaps are for that end customer that will give us a better position early in that life cycle.

 

Caitlin Zager: Exactly.

 

Anderson Williams: So, what about when you’re growing? How do you think about contributing or offering research that’s insightful and meaningful during the growth process?

 

Caitlin Zager: Well, I think you can’t do everything all at once. So, a really helpful piece of research for growing is benchmarking. And so how can you see what the right kind of places are to kind of hold up the company and see where you’re maybe falling short and where you’re excelling. So, you can help understand where to spend your time.

I think the other piece of it is industry trends and making sure that you’re still on the right track. So many of these industries change so quickly. And so how can you make sure that the trends that you’ve discovered for the planting phase are still valid or still right for the growing phase.

And then I think finally just making sure that you understand how you’re meeting the needs of your customers and has that changed as you’ve gotten bigger? And are there any other spots where maybe you are not meeting the needs of those customers? And I think keeping the customer in mind is really the best way to think about how you want to use research.

 

Anderson Williams: And what about on that tail end of the process where a company is built? It’s starting to really scale and optimize and systematize and then and our model begins to start thinking about how we exit that company, that harvesting stage. What does it look like to think about research at that stage?

 

Caitlin Zager: I love this stage the most.

I think it’s really exciting because you really can understand you’ve got a full set of customers. You can see kind of from their insights, what’s going well, what’s going poorly, where they’re going in the market. So, you can see some, again, benchmarking there, but then really looking at. What is your value proposition within that overall market?

And how can you make sure that you’re separating this company out to be attractive for the next group and to make sure that they see the value of what you’ve put together? And so, so much of that is looking at the competitive set. So much of that is looking at where the industry is going and how you’re best positioned.

And so, it’s a really nice way to kind of think about organic growth.

 

Anderson Williams: And I got to believe that there’s an opportunity there in some cases to even have insights to the market and your differentiation to help educate the potential buyer on the other side. They’re going to have their set of research undoubtedly, but because you have a customer base, you could be talking to, and you have patterns of your business and referral patterns and things like that, that they might not have secondary access to.

You may have primary research that actually helps you tell your story better than they could otherwise understand, I would imagine.

 

Caitlin Zager: And I think nothing is more attractive than a company that knows their customers. And so, if you know your customers well and you know exactly how you’re serving their needs, that’s a great story to tell.

I think it goes back to what we were talking about a little bit earlier about the nice thing about doing research in this space is that it’s a process. It’s iterative along the way. It’s not a discrete product. So, there’s not a place where it makes sense to just plug in the research because I think it should be part of the ongoing discussions and the ongoing thinkings of all these companies that we’re working with.

As kind of a best case, you would come into the research with an open mind and kind of asking questions to understand and like seeking to understand what’s going on with your customers, what’s going on with the market, what’s going on with the right decision there. Sometimes I think people come into it, instead they’ve got a decision that they think is right and they’re kind of seeking the confirmatory research, it kind of feeds into that confirmation bias and then that’s tough because then you might get research back that doesn’t align with what you’ve started, and it puts you in a really difficult position. So, the best research is research that’s done early and done often.

Anderson Williams: Yeah. Well, and in that latter case, it’s a human bias, right?

This idea of confirmation and the reality is you could deliver great research to me on a great question that I had to ask, but I may not be willing or able to see what the research is actually telling me.

 

Caitlin Zager: Yes. Or it might be too late, you’ve already gone down the path because you thought the research would say something else, and you didn’t have time to wait. And so that’s a completely common and valid kind of response. But then you’re kind of wasting the time and the money to do the research at all.

 

Anderson Williams: Yeah, and you’re almost get into a trap of you’re doing the research, not just to confirm, but also to say you did the research.

 

Caitlin Zager: Yeah, to check the box. And that’s almost worse too, because then You’ve wasted a lot of money and time on a decision you were going to make anyway.

And so, I think it’s one of those pieces where if you’re going to engage in research, engage when you’re still in the questioning phase because that’s when it’s going to be the most helpful.

 

Anderson Williams: If you enjoyed this episode, check out our other Bigger. Stronger. Faster. episodes at www.shorecp.university/podcasts. There you will also find episodes from our Microcap Moments as well as Everyday Heroes, each highlighting the people and stories that make the microcap space 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, recording and editing by Reel Audiobooks, sound design, mixing and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Caitlin Zager.

This podcast is the property of Shore Capital Partners LLC. None of the content herein is investment advice and 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.