Seeing a lot of threads of people asking about mid-level PE professionals (VP, Principal) going off and launching a fundless sponsor (raising capital on a deal by deal basis) or launching micro cap funds.
Curious to hear about any actual examples of non-MD level PE investors who went off and started their own funds (in the last ~15 years) and raised successfully.
On the other hand, I’m also curious to hear any anecdotes where things didn’t turn out as planned for mid-level PE investors - stories of what went wrong.
Edit: Examples don’t need to be well known home runs.
Based on the most helpful WSO content, there are several insights into mid-level PE professionals (VPs, Principals) attempting to launch their own funds or fundless sponsor models:
Successful Examples:
Challenges and Failures:
For more detailed anecdotes and discussions, you can explore threads like: - https://www.wallstreetoasis.com/forum/private-equity/leave-banking-to-s…</a">Leave banking to start a PE fund? - https://www.wallstreetoasis.com/forum/private-equity/from-private-equit…</a">From Private Equity Associate to VP in Private Equity
These threads provide insights into both the successes and pitfalls of mid-level PE professionals venturing into fund launches.
Sources: From Private Equity Associate to VP in Private Equity, Starting a Private Equity Fund/Firm, Q&A: VP in Private Equity (Growth Equity + LBO)...Post-MBA...Formerly IB Analyst, https://www.wallstreetoasis.com/forum/venture-capital/vc-is-a-laughable-shitshow-change-my-mind?customgpt=1, From Private Equity Associate to VP in Private Equity
Diversis was pretty successful (at least in terms of raising money). Raised $300M in 2019 and $700M in 2021 (so ZIRP heights). Not sure how performance has been.
Interesting (if fluffy) Buyouts piece on them: Buyouts_Cover-story_DEC21.indd
That’s a great example. Kevin Ma started as a fundless sponsor at 28 years old before launching a dedicated fund. Taking a step back, it’s impressive to make it happen at that age — and it’ll still take time to build reputation / prove fund performance, which I’m less indexed on for this post.
As prev mentioned, Diversis is a great call out. Garnett Station Partners is also worth mentioning.
It's worth noting that most folks, even seasoned partners can't spin out and raise a fund immediately - they have to start deal by deal and build an independent track record before LP's will commit to a fund. This article talks about Diversis' start but also Hollie Haynes of Luminate, who was a successful partner at Silverlake but still needed to start out deal by deal.
Bit off topic, but I have the feeling that most IPs are just so incredibly risk averse for such a move (for good reasons ofc), which is a shame. I am a Senior Associate and find it extremely hard to connect with like-minded people in the PE space, i.e., investment professionals willing to bet on themselves.
Generally speaking PE nowadays (vs the 80s and 90s) attracts very risk averse people that are constantly calculating the risk adjusted math of every move they make. If you're constantly running that math on a $ basis, it very rarely makes sense to start your own thing.
Ironically, the founders of the funds everyone admires were the types of people willing to go off and make a bet on themselves.. but once they became established they hired more risk-averse people to man the ship as these types make good employees (and help the founders get v rich) - capitalism 101.
It is so funny. The folks that populate the rank and file of all the blue chip firms would look down on the original founders if we saw them in their day of being the lowly sales people. I think about that every now and then. Perhaps not so dramatic, but it is somewhat true.
In before the consumer dude shows up to pump his own fund
LMAO
I’d also add Dominc Ang, founded Turn/River capital. Left Vector Capital as a VP, bought and sold an ecommerce business (search fund?) then started a PE fund.
I’d also add Activant Capital. Guy from Serent who I assume was a Principal. Seems more like growth vs buyout
Fred Coulson of Five Elms - looks like he was a VP at TH Lee Putnam Ventures?
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