Avante Capital, a Los Angeles-based provider of uni-tranche debt, subordinated debt and minority equity investments, has set its sights on launching its third fund over the next six-plus months sporting a target in the neighborhood of $300 million including leverage.
Like its predecessors, the pool would be structured as a small business investment company, or SBIC. The Small Business Administration-managed SBIC program provides fund-level leverage up to $175 million per fund. The firm may also raise a sidecar, which could take the form of either a co-investment fund, or a non-levered, non-SBIC pool designed to appeal to investors with a distaste for fund-level leverage.
Last week I caught up with Founder and Chairman Jeri Harman–a long-time proponent of helping women enter the asset class–to discuss the firm’s plans for Fund III, and of course its hiring plans. Harman is a global events coordinator for the Private Equity Women Investor Network; past chair of the Small Business Investor Alliance; and a 2013 inductee into the National Association of Women Business Owners Hall of Fame. Her firm won the 2018 SBIC of the Year award from the Small Business Administration. Here is what she told me.
Describe your investment strategy. Avante Capital is a lower-mid-market private credit and private equity fund. We’re investing primarily in sponsor-backed transactions, targeting companies of $3 to $20 million in EBITDA. And we’re investing $5 to $25 million in the form of uni-tranche debt, both synthetic and hold-all; traditional subordinated debt; and equity co-investments below our debt. We get most of our transactions through the private-equity funds that we partner with.
How important is it for you to back women-owned and minority-owned companies? We are highly diverse throughout our firm: eight of our nine professionals are women, minorities or both. Having said that, we have a special interest, but not an exclusive focus, on investing in woman-owned and minority-owned or managed businesses. We’re trying to invest in the best lower-mid-market companies, and partner with the best lower-mid-market sponsors across the United States. We have a very strict and disciplined approach to maintaining credit standards and a high standard for the kinds of equity stories we’re looking for. If the business is minority or women-owned it increases our interest. But it still has to pass all of our other hurdles. Diversity will become an even stronger focus in our next fund. We just have to find enough women-owned and minority-owned or managed companies that have scale.
What’s a recent example? We have a company in our portfolio in the restaurant equipment business, called Cornerstone Foodservice Group. They have a fabulous woman CEO that we think very highly of. We had her come present, along some other portfolio company executives, at our annual LP meeting to showcase the kind of talent we have in our portfolio. What makes her so effective are the qualities any CEO needs, regardless of gender. She ha strategic vision. She has really strong leadership qualities with the management team. She also has very strong connections in the industry. When she became CEO, she expanded the reach of the company—in terms of the customers the company has access to.
What are your hiring plans? For Fund III we might add a junior person or two. We have a full complement of four partners, including our CFO. We’re getting ready to add a part-time partner to our investment committee. Earlier this year we added a director of business development and investor relations, Daniela Messina. We have two vice presidents and a senior associate.We will build from the bottom up with our third fund. We haven’t built an ideal candidate profile. But we look for hard workers with strong intellectual horsepower, good communications skills and relevant training, particularly on the modeling side, typically from having worked in private equity, private credit or investment banking.
How do you find women and minority candidates? While it’s not easy it is certainly achievable with dedicated effort. You have to make it clear to recruiters that you want to see diverse candidates, and that you’re simply not going to make a decision before seeing that. We also have an internship program for women in business school or just out of business school that has worked really well for us. We don’t promise that we’ll hire them. But we can at least give them good experience and then help them find a position in the industry.
Reach Jeri Harman.