Jeff Schwartz

So we've made some, I think, really smart strategic decisions about how to grow the firm without sacrificing performance and sacrificing the experience that our employees were getting as investors.

So fundraising is a challenge for, except for the very, very large established private equity firms, for anyone in the middle market or the lower middle market, capital raising is a challenge.

We, as you mentioned, we were somewhat victims of our own success early on and were able to leverage some of the relationships with high net worth individuals and small foundations and family offices that we'd had.

throughout our career, and they served as the investor base for our funds early on.

But as a result, we never introduced ourselves to the market in a more formalized way through placement agents to institutions going on roadshows and attending conferences and the like.

So each fund that we've raised, especially as we've moved into different strategies, has been a little bit of a new reintroduction exercise.

Yeah.

While many other funds, they make the investment when they're raising their first fund to hire a top tier placement agent and to create a stable of institutional investors with the mindset that they would be long term investors in the firm.

for the current fund they were raising as well as subsequent funds and continue to grow with the firm's capital base.

Our investor base, which heretofore has been more individual high net worth investors, as well as much smaller family offices and foundations, they sort of tap out at a certain point and they have different events in their lives where they are not solely focused on investing and deploying additional capital while institutions, that's their job.

So they're more reliable investors

long-term investors, but they present their own challenges.

So the way we've tried to grow the firm, and this is more of a strategic investing decision than necessarily driven by what's the optimal way to raise capital, is we like to say we've grown the firm horizontally rather than vertically.

We are keenly focused on what we call the lower market, which is even below the lower middle market.

Businesses between $50 and $100 million of enterprise value, plus or minus $10 million of EBITDA.

These are small businesses playing a market that is highly inefficient and gives us an opportunity to generate outsized returns for investors due to the transactional inefficiency in that part of the market, as well as the strategic guidance and support and help that we can provide these companies.

And so as a result, as we've tried to grow the businesses with the firm, which all firms are required to do, rather than take our successful $100 million first fund and then just raise one multi-strategy fund after the next in sequence, we've

tried to raise different strategies all focused on the lower middle market.

So our first fund was a SBIC debt fund.

Rather than raise the second SBIC debt fund, our second fund was a special opportunities fund.