SBICs & Warrants
SBICs & Warrants: SBICs usually invest 10-25% of their funds as equity alongside their core product which is mezz debt,
Fundraising
80 posts
The cost of capital placement agents
Placement agents help independent sponsors raise debt and/or equity, but at a cost. If the deal is cheap, it
When to hire a capital placement agent
The 3 situations where independent sponsors should consider engaging a capital placement agent to help with the fundraise: #1: First
Pushed Out by Anchor Investor
How to minimize the risk of predatory capital providers stealing your deal: • Include non-circumvention provision in NDA. • Own the relationship
Specificity is key
I just read a deck where the sponsor suggested 4 avenues for growth: • Ride macro opportunities • Expand geographically • Add service
Investor Reporting as a Differentiator
Reporting is an area where independent sponsors can differentiate and excel, and it is the best way to build strong,
$1m equity = Biggest pain
$1m = pain in the ass equity check size for independent sponsors Too small for institutions Too big for HNWIs "
PG vs. Conventional lenders
I recently chatted with a top-class searcher who was under LOI and contemplating conventional lenders vs. SBA loans. As I
The Value of Quick No's
“A quick no is the second best answer,” said an independent sponsor when chatting with prospective investors. It’s so
When to socialize with investors
When to socialize your deal with investors: You should have 2-3 investors that you can ping whenever about whatever. So
Equity Sources for Independent Sponsors
Independent sponsors raise equity from a variety of investors. Here is an overview of the main types of equity investors
Independent Sponsors = Service Providers (to Investors)
“We’re actually just a service provider. Instead of looking for deals that I really like, I look for deals
12 Keys for Above-Market Terms
12 factors that can help independent sponsors negotiate above-market terms with their equity investors: 1. A low valuation. Creates value
Big Deals Need Equity Anchor
Most independent sponsors have neither the time nor bench of FOs/UHNWIs to syndicate 10+ multi-million dollar (~$2m+) checks before
Illiquidity Premiums vs. PE
On the topic of liquidity premiums: Yes, all else equal, the liquid asset will always be more valuable. This is
Meet Investors 1-on-1
Do not consolidate multiple prospective investors into one presentation; pitch meetings should be 1-on-1s. What you think: • Efficient to consolidate.
Exit Fee for Independent Sponsors
Everyone knows the three standard pillars of independent sponsor economics (closing fee, management fee, carried interest). How about an exit
QSBS: Pay Zero Capital Gains Tax
QSBS: pay zero capital gains tax. A heavy argument in favor of structuring your newly acquired entity as a C-Corp
When Deal Drags On Pre-Closing
Best practices with a seller when your deal is dragging on without closing: (i) Over-communicate. Weekly email updates, frequent phone
White House Coming After Carry
The White House stated today that a new tax bill will aim to eliminate the "carried interest loophole."
SBICs Are Highly Aligned
SBIC/mezz lenders are under-rated for their strong alignment with independent sponsors. Typically they’ll be your senior lender (70-90%
Syndicate vs. Anchor
Equity raises are (i) syndicated or (ii) anchor-led: (i) Independent sponsors usually prefer to syndicate equity from 5-10 minority investors.
Why 30% IRR Is Needed
"Why do I need to show 30%+ IRR in my base case?" A high return is needed to
DOGE, an SBA(7)a killer?
SBA 7a loans weren’t meant to subsidize lower middle market private equity. They weren’t meant to serve as
