Independent Sponsors

Independently Sponsored: Riveter Capital

AUGUST SPOTLIGHT

Colleen Gurda

Co-Founder & Partner

Sarah Abdel-Razek

Co-Founder & Partner

FIRM OVERVIEW

Riveter Capital is a New York-based women and minority-owned private investment firm focused on investing in women and minority-owned or led businesses in the lower middle market

Firm Profile
Founded in 2020
HQ in New York, NY
Areas of Focus
Business Services
Consumer & Retail
Manufacturing
Healthcare Services
Distribution
Investment Criteria
Revenue: $10 million+
EBITDA: $1-5 million
Woman/Minority Owned or Led
Proven Business Model
Stable Industry
Clear Growth Plan
U.S. Based

Going Independent

How to Launch an Independent Sponsor Operation

TONY HILL

Colleen and Sarah, welcome to the tenth edition of Independently Sponsored. Quite an auspicious number, if you ask me. It’s great to have you! Now, I know the theme of today’s interview is the ABCs of launching your own independent sponsor operation but, before we get to that, I’d be remiss if I didn’t ask you to tell us about Riveter Capital, what drove you to found it, and the meaning behind the name? I remember first reading about Riveter earlier this year in an article by David Toll and I was fascinated by its crystal clear, purpose-driven mission.

SARAH ABDEL-RAZEK & COLLEEN GURDA

Thanks for having us Tony! We founded Riveter in 2020 with the goal of combining our investing and operating experience to invest in women and minority owned or led companies in the lower middle market, which we define as $1M-$5M of EBITDA. Having spent most of our careers in a male-dominated industry, we knew the specific challenges many women in positions similar to ours face—as well as the opportunities to do things differently. We’ve both always had an entrepreneurial itch but were waiting for the right time in our careers to make the jump. Finding a partner in crime was also really important; both of us had the same vision yet complementary skillsets and the mutual support made the decision much easier.  

Women and minority owners represent so many small businesses but have very limited access to capital. Colleen and I saw a huge market gap in the PE world for these types of businesses with less than $4M EBITDA, a minimum requirement for many lower middle market PE firms. We are essentially trying to close the access to capital gap, while realizing good returns for our investors with limited competition.

The name was inspired by Rosie the Riveter, a symbol for female empowerment. The “We Can Do It!” poster is on the wall at our office as a consistent reminder for us personally as founders as well as for our mission to empower others.

TH

I love it! Rosie would be proud! Thanks for the background. Truly rousing and it reminds me of an interview we did with Richard Baum of Consumer Growth Partners where he remarked on the importance of “speaking the language of the seller”. Admittedly, the context was different, but I still see a bit of a parallel. Tell us, how has the market—business owners, bankers, capital providers, etc.—reacted to Riveter’s positioning?

SAR/CG

While we knew we had a unique angle and a big differentiator, we were overwhelmed by the feedback we received when we first launched. Everyone we talked to, from sellers to bankers to investors, made a comment about how they had never come across a PE firm solely focused on this demographic. In fact, the reason we are here today is because your colleague Mac Lothrop, who I met at a networking event, said that we needed to talk to you for this series given our unique strategy. More specifically, we have heard from numerous bankers that often women-owned businesses look for women-led funds or women investors to sell to and how they generally struggle to find investors that meet these criteria.

Last year, we got Riveter WBENC certified as a WBE; this has been another key differentiator for us—we are able to maintain WBE designations post transaction.

TH

That’s great. I’m elated to hear the market has been that receptive. Also, I’m very grateful to Mac for connecting us. Ok, let’s get to the topic du jour: launching an independent sponsor operation. Let’s start at the beginning. What are the big pros and cons of “going independent?”

SAR/CG

The biggest pro is the agility and flexibility it provides for individuals who have the right experience and background but don’t necessarily check all the traditional boxes for institutional investors and therefore can’t raise a committed fund. While we believe our backgrounds and skillsets are the perfect fit to execute on this strategy, investors really look for that history of investing together, and the lack of a joint track record was a big hurdle for us to raise a fund out of the gate. Unfortunately, this is a hurdle for most females in the industry who are looking to partner with another female to found a firm.

Being an independent sponsor allowed us to focus 100% of our time on deal sourcing, underwriting and execution so we can prove out our thesis faster, build a joint track record and give us the option to raise a committed fund in the future if we choose to. We have found that if you have a good deal under exclusivity, there is an abundance of capital options out there from banks to SBICs to family offices. And while it does take a bit more time during the transaction process to get individual capital providers up to speed on a deal, we haven’t had an issue yet, knock on wood, finding not only capital providers but good, value added capital partners.

The biggest con, as you might imagine, is not having the cash! A big hurdle for any independent sponsor is convincing investment banks to show you deals that fit squarely in your strategy because they are concerned about us not having committed capital. Therefore, we spend a lot of time building relationships with our core investment banks to earn that trust and credibility, and like to bring in our capital providers and partners early in the process to help demonstrate certainty to close.

TH

People ask me all the time, “what background or skill set does someone really need to be an effective independent sponsor?” For example, do they have to have a PE or banking background to succeed? Also, I’ve met independent sponsors of all ages, from young professionals in their early 20s to seasoned deal professionals in their 70s. To what extent does good, old fashioned experience matter, if at all?

SAR/CG

That is a great question and one we discussed at length before launching. I think the answer is: it depends on the strategy and what the sponsor wants to do post transaction. For us, we aren’t looking to be just deal finders; we want to be hands-on investors who are truly sponsoring the deal and bring a lot of value to the table. Therefore, we knew we needed to bring (i) a strong institutional view of investing, structuring, underwriting and diligence, and (ii) operating experience to bring financial, strategic and operational horsepower to these companies which are primarily founder/family owned and don’t have built out management teams.

TH

So, let’s assume you understand the independent sponsor game, you have the right background and skill set, and you’re ready to take the plunge. Where and how do you start? Can you walk us through the checklist?

SAR/CG

I’m not sure this is the checklist, but this was our checklist when we started Riveter:

  • Define your strategy and differentiator
  • Prove there is a big enough market for your strategy to be successful
  • Understand who your main direct competitors are (if any)
  • Develop a business plan
  • Come up with a firm name (arguably the hardest part…) and incorporate
  • Set up emails/website
  • Trademark your firm’s name (if it’s as good as Riveter’s!)
  • Get your name out there – develop a core list of investment banks and investors that fit your strategy and start reaching out
  • Develop your souring strategy
  • Deal source, deal source, deal source
  • Find good deals where you have a strong angle
  • Close deals!

TH

Ha! Well, you definitely crushed the firm name. Earlier this year, Richard Tannenbaum of Ouroboros Group and I were joking about the way all private equity firm names sound the same

Anyhow, I’ve launched a couple of startups over the years and your checklist sounds a lot like the startup journey, except perhaps quite a bit more daunting. From an operational perspective, startups are relatively in control of their destiny. As an independent sponsor, however, so much of your success is inextricably linked to forces and relationships out of your control. What pitfalls would you caution other up-and-coming independent sponsors about?

SAR/CG

Relentlessly prioritizing and re-prioritizing tasks that will help you prove your thesis and get deals done is critical. We start everyday by taking 15 mins to talk through the goals for the day and prioritizing them in order of importance. We have heard horror stories of independent sponsors who spend the first 12 months focused on developing beautiful marketing materials and websites with no traction whatsoever on deal sourcing and execution.

TH

Indeed, and it’s the same on the startup side. We’ve all met entrepreneurs more interested in telling people they’re starting a business than actually running the business. So, flipping my last question on its head, what are the absolute most important things a budding independent sponsor wants to nail out of the gate?

SAR/CG

As you’re starting out, first impressions and building a reputation are everything. From ensuring that your investment memos/investor materials are high quality, to being extremely responsive to all parties (banker, sellers, investors), to always being prepared for meetings. Invest your time into things that will help set you up for success and avoid getting sucked into administrative tasks that won’t help you achieve your goals.

TH

Sound advice. Looking back at your journey, is there anything you’d do differently?

SAR/CG

One big mistake we made early on was we put all our eggs in one basket. When we got our first deal under LOI, we both ended up spending most of our time working on the deal to get it closed, and lost sight of our deal sourcing engine. Unfortunately, after getting through all the diligence and raising the capital, the deal fell apart due to deteriorating performance and we were left with no other real leads. Since then, we have carved out time in our calendar a couple of times a week to focus exclusively on deal sourcing no matter how busy we are.

TH

Ouch. Sorry to hear about that, but I’d be willing to bet a great many of our readers have fallen into that trap once or twice. I couldn’t agree more, though. You have to keep the top of the funnel flowing. 

Last question before we get to the big finish: what kinds of deals or situations should our readers keep an eye out for that are perfect for Riveter Capital to get involved in? And how can they reach you?

SAR/CG

Businesses that are generating $1M-$5M of EBITDA that are (i) women-owned, (ii) women-led, (iii) minority-owned, or (iv) minority-led. We define led as a C-suite executive that meets the demographic requirements. We are also uniquely positioned to acquire WBE businesses given our ability to maintain the designation. So if any PE firms have a good opportunity that is WBE but can’t do the deal given the loss of designation upon a change of control, make sure to reach out to us—we’d love to partner on the deal!

We can be reached at sarah@rivetercapital.com and colleen@rivetercapital.com. We both have our emails on our website and LinkedIn so hopefully it’s easy for your readers to get in touch with us.

TH

Very helpful, and a reminder that we have some introductions to send your way. Hopefully, our readers do as well.

Well, Colleen and Sarah, the moment I’ve been waiting for has arrived. As recompense for the immense circulation and press coverage these interviews get, every participant on Independently Sponsored has a moral obligation to regale our readers with a humorous or interesting (we prefer humorous, by the way) story from their deal-making days. Dozens have gone before you. Millions will follow. We’re ready when you are…

SARAH ABDEL-RAZEK & COLLEEN GURDA

(Sarah) I was involved in a distressed M&A transaction where we were negotiating a settlement with the largest creditor, a high-profile celebrity. Before we could get both parties in the same room, the attorneys spent 3+ hours negotiating a very thorough NDA to ensure that the meeting was kept confidential. After finally getting the meeting started, we took a break and the celebrity went outside and took a selfie with the law firm name clearly in the background and posted it on Twitter, immediately breaching the NDA we spent all morning negotiating…

Tony Hill

HAHA! That’s awesome. Everyone loves a good celebrity story…I hope they at least had the courtesy to tag you in the photo!  

Colleen, Sarah, this has been a pleasure. Thank you for sharing your journey with us. I know your experiences and perspectives will resonate with our reader base, but my hope is that they will also inspire other female and minority professionals to follow in your footsteps.

Congratulations again on launching Riveter Capital and on how far you’ve come already. I would normally end the interview saying, “good luck!”, but I think a more apt send-off this time might be, “you can do it!”

“Independently Sponsored”

Trivest has a long and successful track record of working and closing deals with independent sponsors. Each month, we interview a leading or up-and-coming independent sponsor about a relevant topic of their choice. To mix things up, at the end of each interview, we ask our guest to recount a particularly memorable (and hopefully humorous) deal-making experience. Our goal is to deepen the knowledge and strenghten connections within the independent sponsor community.
Interested in taking part? Have a potential transaction to discuss?
EMAIL TONY HILL

About Trivest

Trivest Partners LP, with offices in Miami, Charlotte, Chicago, Los Angeles, Philadelphia and Toronto, is a private investment firm that focuses exclusively on the support and growth of founder-led and family-owned businesses in the U.S. and Canada in both control and non-control transactions. Since its founding in 1981, Trivest has completed more than 300 investments, totaling approximately $7 billion in value. Trivest is one of only 18 firms recognized by Inc. Magazine as one of the top-50 founder-friendly private equity firms in both 2019 and 2020.

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