E288: Inside a PE Fund Ranked #1 in IRR, DPI, and TVPI
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How did Renovus Capital Partners raise $875 million in a tough fundraising market?
You've raised $875 million in one of the most difficult fundraising markets in decades. How were you able to accomplish this?
For us, it was a function of having the right time, the right strategy, and the right team. Our track record's been good leading up to the fundraise. We have been posting a lot of exits, a lot of very successful exits, and our DPI numbers have been great at a time when there isn't a lot of DPI. So the timing was really good. Our strategy resonated with investors as well. We focus on the lower middle market. We buy founder-owned businesses. We buy sub $10 million EBITDA businesses. And we are a purchase price matters firm. And I think all of that story is resonating right now with LPs. We have a 45-person team, which is quite a large team relative to our fund size. And I think people love our team today.
Every onsite diligence session that people do, we get complimented on the quality of our team.
What strategy does Renovus use to outperform on DPI, IRR, and TVPI?
And I think it's a combination of those things, the time, the strategy, and the team that led to a great outcome.
Renovus, alongside being over-subscribed on 875 million, you're also ranked number one in terms of quantitative metrics like IRR, DPI, TBPI. What allows you to capture alpha in your fund?
What's the secret sauce? It's a great question. Just a quick story. There was a morning in 2022 when we both woke up to having all these inbound emails from institutional investors, highly respected names from around the world who wanted to set up meetings with us. That's not what we normally wake up to. And we were wondering what was going on. And it turns out we had been named in one of these studies and
Why does focusing on the lower middle market provide a structural advantage?
This particular study, HEC Dow Jones Private Equity Report, is one that turns out to be very widely followed. You needed to have 10 years of track record in order to get into that study. Come 2022, we had built up 10 years of track record, and I've been in that study every year since then. So it's just been fantastic for us and helped to raise our brand and raise our profile, which has been great for fundraising, but it's also been great for Recruiting in executive talent to our portfolio companies, recruiting in young and very talented people who want to make their careers at Renovist. It's been an amazing momentum builder for us. But to answer your question, what is the secret sauce? You know, there's really no one thing in private equity.
And we hear this all the time from founders considering selling their businesses. Every private equity firm looks the same. You know, we show up in our, you know, Patagonia vests and we look a certain way and, you know, we're smart people.
What is the role of talent density in Renovus' success?
But, you know, from one firm to the next, are they different? And in some ways we are like the others. You know, we do LBOs, we do some business repositioning, we employ smart, competitive, driven people. So what is it that has enabled us to deliver the results that we've delivered for the investors? We actually, in last year's annual meeting for our investors, tried to answer this question for them in the course of our presentation. And what it really came down to was we put forward three questions for ourselves. What game are we playing, really? How good is our team? And do we have any special resource advantages? The game we're playing is about playing in the lower end of the lower middle market. Almost every deal we do is of some $10 million without business.
The number of at-bats that we see compared to an upmarket strategy, it is night and day different. We have so many more targets that we can pursue within our strategy. We are buying from founders. We're the first institutional investor. We're buying fundamentally solid businesses, but where there is so much value that an experienced institutional investor like us can have.
How has Renovus evolved from three founders to a scaled firm?
So we're trying to play what we call the game on easy mode. I think that's been a big driver. In terms of the team, we have a big team. We mentioned that. 45 people. That is large, especially relative to the fund size that we have. One of those investments that we've made is we have a full-time director of people.
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Chapters
8 chapters
1
How did Renovus Capital Partners raise $875 million in a tough fundraising market?
0:00–0:47
2
What strategy does Renovus use to outperform on DPI, IRR, and TVPI?
0:47–1:24
3
Why does focusing on the lower middle market provide a structural advantage?
1:24–2:19
4
What is the role of talent density in Renovus' success?
2:19–3:20
5
How has Renovus evolved from three founders to a scaled firm?
3:20–3:39
6
What is Renovus' secret sauce for capturing alpha in private equity?
3:39–8:33
7
How does Renovus structure its portfolio to drive net returns?
8:33–12:31
8
What timeless advice would the founders give to their younger selves?
12:31–31:11
Speakers
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