San Diego-based private equity firm HCAP Partners launched a new fund focused on growing small businesses. The new, $150 million fund, HCAP’s fourth, is focused on adding quality jobs through small- and mid-sized businesses.
Tim Bubnack, a managing partner with HCAP, said the firm generally focuses on companies with between $10 million and $15 million in revenue, and $1 million to $5 million in earnings. Most of the companies HCAP invests in are in the health care, business services, tech and niche manufacturing sectors. Typically, the firm makes investments between $2 million and $10 million.
“We’re providing resources to help these companies grow,” Bubnack said. “We work with owners and operators to assist with scaling their business, growing their business, and we help people--if they’re interested-- exit their business or have a liquidity event.”
HCAP typically invests in companies through mezzanine financing, a combination of debt and equity. In addition, the company provides resources such as financial guidance, capital raising and planning an exit.
Bubnack said HCAP was about three-quarters of the way toward its goal for the $150 million fund. The company is seeking up to $100 million in limited partner capital, with 50 percent leverage from the U.S. Small Business Association. Current investors include banks, national foundations and family offices..
HCAP recently began investing out of the fund, its largest to date. Over its four funds, HCAP has invested in 60 companies, including Baked in the Sun, a Vista bakery; Arosa LivHome, a recently merged provider of home care for seniors; and Accruent, a software provider that was acquired last month by Fortive Corp. for $ 2 billion.
“We’ve seen significant growth in our portfolio companies,” Bubnack said. “We’ve seen some fabulous exits.”
As of last year, HCAP Partners managed $200 million in assets across its first three funds.