The 50 Best US-Based Private Equity Firms for Entrepreneurs – Graham Winfrey

Private equity firms have been called all kinds of nasty names over the years: asset strippers, corporate raiders, vulture capitalists. Don’t be deterred by these labels. The PE firms making headlines over high-profile corporate bankruptcies such as Toys “R” Us are rarely the same investors who back small businesses. In fact, more and more companies are taking private equity investment. In the U.S., the number of PE-backed businesses is up 25 percent compared with 2014, according to research firm PitchBook.

So don’t forget to call PE firms something else: business builders.PE by the numbers$752 billion Amount of uninvested capital that PE companies have at their disposal. That’s a record, up from $469 billion in 2014.Source: Preqin25% Increase from 2014 through 2018 in the number of private equity-backed U.S. companies, up from 6,177 to 7,737.Source: PitchBook10.1% Revenue growth at PE-backed middle-market companies in 2018. Non-PE-backed middle-market companies grew more slowly that year–7.9%.Source: The National Center for the Middle Market at the Ohio State University$713B The total value of private equity deals in the U.S. in 2018. That figure has increased 35 percent from 2014.Source: PitchBook

For some private equity firms, investing in founder-led businesses is a big part of the strategy–if not the strategy itself. Before you test the private equity waters, however, you should first take a hard look at your company. “Founders need to think about what they want out of a PE fund,” says Nick Leopard, founder and CEO of Accordion Partners, a financial consulting firm that works with private equity-backed companies. Some entrepreneurs turn to private equity to help execute their vision; others bring in PE firms to collaborate on new strategies or to finance acquisitions. “Doing that self-inspection first is really important,” Leopard says.

Private equity firms are now sitting on a record amount of uninvested capital, which is good news for businesses seeking funds. That cash pile is prompting those firms to expand their purview and do deals with businesses that just five years ago would have been unlikely targets, according to Tom Stewart, executive director of the National Center for the Middle Market. “They’re investing in younger, earlier-stage companies, and they’re more willing to take a minority stake than they were, because they’ve got to put the money to work,” Stewart says. “It’s more of a sellers’ market.”

Family businesses are often strong can­didates for outside investment. “It’s a rare family that can continue to evolve and grow a business without help from a third party,” says Dave Brackett, co-founder and CEO of private credit manager Antares Capital, which has helped finance acqui­sitions for more than 400 private equity firms. “You constantly need to innovate and bring people on board.”

Selling a meaningful stake in your company can be life-altering. That’s why we’ve created this list of founder-friendly private equity firms. We identified firms that have invested in founder-led companies, gathered data on how their portfolio companies have grown, and asked entrepreneurs to tell us about their experiences–including what any founder should know about outside investors.

That research has yielded our list of 50 firms with a track record of successfully backing entrepreneurs. Think of it as the first step in doing your own due diligence.

The Top 50 US-Based Founder-Friendly Private Equity Firms

Note: “EBITDA” refers to earnings before interest, taxes, depreciation, and amortization. “Enterprise value” refers to the total value of a company.

From the July/August 2019 issue of Inc. Magazine