“Boring” is Beautiful: Investing in Established, Cash-Flowing Small Businesses
Own a diversified portfolio of time-tested small businesses acquired at ~3-5x multiples. Targeting 24% net IRR to investors.
3-5X Acquisition Multiples
Diversification Across 13-18 Businesses
Targeting 24% + IRR Net to Investors
Why Now? 2.3m business are owned by Baby Boomers. Many will need new ownership in the coming years.
How does Entrepreneurship Through Acquisition (ETA) / Self-Funded Search Work?
A “Self-Funded Searcher” looks for and negotiates to buy a business
The Searcher performs due diligence on the business
The Searcher secures debt financing (often via an SBA loan), plus equity from investors
The acquisition closes and the Searcher operates the business as CEO
Typical Investor Economics at the Individual Deal Level
8% - 12% Preferred Return
The investments we make in acquisitions earn a preferred return (annual, non-compounding) typically of 8% – 12% on invested capital.
Prioritized Return of Capital
Investors’ initial capital plus their preferred return must be paid back before any distributions are made to other shareholders (other than for taxes).
Investors continue to receive pro-rata distributions after their initial investment is returned. Salary increases to the Searcher/CEO are capped to align incentives.
Step Up
Investors receive equity in the acquired business with a “step up” of typically 2x-2.5x.
For example, if a business was acquired for $1.0m and Entrepreneurial Capital invested $50k with a 2x step up, we own 10% of the equity instead of 5%.
Access to Meaningful Deal Flow
Every searcher wants to talk to (1) people who have done a self-funded search before, and (2) people who could invest in their deal.
People who have done a self-funded search before
People who could invest in their deal
We are both
Bill Best, CPA, CA
Analysis
- 40+ years of experience in finance, operational leadership, entrepreneurial coaching and investing
- Deep corporate governance and board experience
Michael Trachtenberg
Deal Flow
- Founder of Main Street Capital Network, providing significant self-funded search deal flow
- Creator of the industry standard self-funded search term sheet
Jeremy Schwach
Value Creation
- CEO of Bluetree, scaled to hundreds of employees, exited in 2019 to Tegria
- Founded Hummingbird, scaled to 200+ team members in 2 years
-
Who Can Invest?
Entrepreneurial Capital is open to Accredited Investors only. Refer to the SEC definition of an accredited investor: https://www.sec.gov/resources-small-businesses/capital-raising-building-blocks/accredited-investor
-
What is the Minimum Investor Commitment?
Our minimum commitment is $100,000. We envision capital calls spread evenly over our 2-3 year investment period.
-
What is the Estimated Invesment Horizon?
Entrepreneurial Capital I, LP (the “Fund”) has a default duration of 10 years, in line with the vast majority of closed-end private equity funds.