Tom Duffy

These investors, we like to say they're frequently at the inflection point of their careers, having developed this applicable experience required to not only identify, but also underwrite and operate a portfolio company, all while remaining highly motivated to prove themselves.

To point back to your question, not every sponsor comes from a top pedigreed, highly established PE firm.

That happens to be the middle of the fairway type of sponsor that we're looking for.

If that's not you, if you're an independent sponsor listening to this, that's not the only criteria you look for.

We want to see people who are really trained and specialist in a specific area.

area and have this expertise that's needed to identify and operate this type of business.

So if you can show us you have a track record of one, two or three deals, whether it's as a sponsor already or in a past life that's attributable directly to you and what you've done, we want to take a look at that.

That's exactly correct.

There's countless ways to differentiate yourselves.

And we want to see experiences from all sorts of backgrounds so we can add to the diversity of thoughts and opinions and types of investments that we have on our platform.

So you're exactly correct with that.

So, David, I've listened to a number of your podcast episodes over the past few years, and it's occurred to me that there isn't a lot of time spent talking about the independent sponsor landscape.

So maybe to kick off this question, I can explain to the viewers what is an independent sponsor, why we like them, and then flow into where does this segment of the market stand today?

So an independent sponsor, it's really a subset of lower middle market managers who raise capital on a deal-by-deal basis instead of blind pool commitments.

And they typically target smaller family or founder-owned companies that are less than, on average, about $10 million in EBITDA at entry investments.

We find this segment of the market attractive for a lot of reasons, including less competition for deals, greater opportunity for operational improvements at these underlying companies, and then better alignment of incentives with managers.

And even with these key benefits that I just referenced, most of our institutional peers still don't invest in this segment of the market.

I recently came across a...

a statistic from Citrin Cooperman.

It's a study that showed across all independent sponsor deals from, I think it was 2021 through 2024, only about 5% of lead investors were institutional investors like TIFF.