CHICAGO – Now fully capitalized at $40 million, Chicago’s SB Partners debut fund is aiming at a largely under-served market: middle-market private companies owned by women and minorities.
“The problem has been a limited access to capital for minority, ethnic and women entrepreneurs,” said general partner Leslie Davis. “More and more entrepreneurs fit that profile, and most of the venture capital community has ignored that opportunity.”
Founded by Davis and fellow general partner David Shyrock in 1999, SB Partners began raising its first fund, SB Partners Capital Fund LP, later that same year. Shyrock is the former chief executive and president of Chicago’s South Shore Bank. Davis was the bank’s senior vice president of commercial lending.
“Our emphasis there was on financing minority and women-owned businesses and we were quite successful in that arena,” Davis said.
To date, the firm has completed two investments: an expansion-round financing for Chicago-based safety products manufacturer Stratford Safety Products Inc. and another expansion-round financing for Metropolitan TLC Holdings Inc., a New York-based developer of educational materials.
The firm will continue to target manufacturers, service providers and distribution companies with late-stage, expansion-stage and buyout capital. Specifically, its investments will focus on financial services, business services and educational services. These are high-growth opportunities not usually associated with either minority or ethnic management teams, Davis said, but still, the capital markets have remained closed to them. SB Partners is prepared to fill the gap.
“People will project onto them some differences that don’t truly manifest themselves in business,” she said. “In general these firms are getting larger and larger. They’re on a high-growth trajectory that requires them to have access to capital.”
Each individual investment will range between $3 million and $5 million, with capital reserved in the fund for follow-on opportunities. Although the fund will focus its investments in the Midwest, it will consider opportunities nationally.
Among the firm’s list of general partners are banks, insurance companies, pension funds and foundations. The fund’s 2.25% management fee and 80%/20% carried interest structure will be in line with industry standards.