PE SBIC Funds?
Does anyone have any experience with PE SBIC funds? Interviewing at one and not really sure if this is a good space to be in long term. Is comp similar to LMM PE?
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Based on the most helpful WSO content, SBIC (Small Business Investment Company) funds operate in a niche space within private equity, often focusing on smaller deals and leveraging government-backed financing. While they can provide a unique opportunity to work closely with portfolio companies and gain hands-on experience, the long-term appeal depends on your career goals.
In terms of compensation, SBIC funds are generally aligned with LMM (Lower Middle Market) PE funds, but there can be some variability. LMM PE compensation for associates typically ranges from $200K to $300K annually, depending on the fund size, location, and performance. SBIC funds might lean toward the lower end of this spectrum due to their smaller deal sizes and reliance on government leverage.
If you're considering this space, weigh the following: - Hands-on experience: SBIC funds often involve significant operational work with portfolio companies, which can be a great learning opportunity. - Deal exposure: The deals are smaller, so you may not get exposure to the larger, more complex transactions seen in traditional PE. - Exit opportunities: Moving from an SBIC fund to a larger PE fund or other finance roles might be more challenging compared to traditional LMM PE.
Ultimately, the decision should align with your long-term career aspirations and the specific dynamics of the fund you're interviewing with.
Sources: LMM PE compensation, recruiting and port co. work, Ask CompBanker, LMM PE Associate Experience - What is it REALLY like?, Ask CompBanker, Associates who started as analysts: Why did you stay in IB?
I’ve been very disappointed with the move to an SBIC group. We do debt primarily. Has been slow lifestyle and poor comp
how poor has comp been relative to LMM PE or corp dev?
I started at one. If you are early in your career, you should just focus on good reps. I would rather go to an active SBIC than a sleepy LMM. If you are mid-career trying to find a long term home, there’s so serious limitations to SBICs vs. a similarly sized non SBIC.
The types of companies you can invest in are quite limited. Your ability to grow fund size in the program (if utilizing SBIC leverage) is severely limited. You can’t efficiently have a $500M SBIC fund for example. Generally speaking, your LPs are lower quality, because they want CRA credit.
Most SBICs use the leverage, have bank LPs, and are mezz funds. A few claim to be equity shops but really are doing strips of equity and debt in their deals. That’s a weird model, imo, that is destined to have lower returns. At my shop the guys were focused on the 2% mgmt fee and viewed the carry as gravy. One of the reasons I eventually moved on.
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