Star Mountain and its affiliates provide a unique “One Stop Shop” flexible capital solutions approach, scale-driven resources and expertise to help grow small and medium-sized businesses (I) as a strategic limited partner into other private equity and private credit fund managers focused on the lower-middle-market (including SBIC funds and as an anchor investor), (II) as a secondary investor providing liquidity to existing limited partner investors and (III) directly into companies in the form of senior debt, mezzanine and/or equity. The Founder and CEO of Star Mountain Capital, Brett Hickey, discusses with KITE Invest the firm’s origins, investment interest and focus.
KITE Invest: Having founded Star Mountain five years ago, could you please comment on the origins and your decision to launch the firm?
Brett Hickey: I have always been a combination of an entrepreneur and a finance guy. I started my first company in high school and sold my first business in college. Growing up in Canada, I wanted to come to NYC to be in the epicenter of finance. I decided to work for, at the time, the largest financial institution in the world, Citigroup, in their Investment Banking group then called Salomon Smith Barney. My clients were asset management firms, banks and insurance companies. In 2004 I launched a private investment fund providing capital to U.S. based small businesses. In 2009, I did an executive MBA type of program at Harvard Business School, which helped me decide that we needed to create a truly unique business model that “solves problems” and is “unique” relative to competitors. We launched Star Mountain to provide investors with efficient access to the large, underserved market of private smaller businesses in the U.S. and to provide business owners with a flexible and efficient platform to access a value-added financing partner with the type of capital that best fits their business.
KITE: What were the reasons behind the Star Mountain focusing its investment strategy on small and medium-sized business?
BH: There are approximately 200,000 of these businesses in the U.S. which makes it equivalent to the 11thlargest market in the world. The inefficiencies in this market provide investors with an attractive risk-adjusted return where we’re able to make a material difference in helping business owners grow their companies.
KITE: Please shed light on these different sources of capital and what was the catalyst behind Star Mountain Capital diversifying its services?
BH: Star Mountain has separate accounts with larger finance institutions including insurance companies, banks and other asset managers as well as large family offices and multi-family offices. It also has co-mingled vehicles. This platform allows Star Mountain to tailor investment objectives with the desires of investors and provide companies with a wide range of financing structure options and a more value-added platform of partners and relationships within Star Mountain’s “Collaborative Ecosystem”.
KITE: What are the typical types of investment opportunities that Star Mountain Capital is attracted to? Industry? Geographical location? Etc.
BH: U.S. based companies that have between $10 million and $150 million in annual revenues looking to sell their businesses or for growth or acquisition capital. We are industry agnostic and have experts and local representatives in nearly all industries and geographies across the U.S.
KITE: In terms of competitiveness, how does Star Capital Mountain differentiate itself from other limited partners?
BH: When Star Mountain invests as a Fund-of-Funds into other fund managers, it typically (i) makes a large investment of up to 50% of a fund’s capital base, (ii) helps provide targeted deal flow and (iii) assists with underwriting, portfolio management and all other aspects of running a small private investment fund.
KITE: The team at Star Mountain Capital boasts past experience at Credit Suisse, Goldman Sachs, Morgan Stanley, the SBA, and GSO/Blackstone.When approaching possible investment opportunities, how much weight is given to a team’s experience and credentials?
BH: Star Mountain believes that it is people who create value and as such, there is a very large focus on the strength of the team with funds and companies alike.
KITE: If you were to give any piece of advice to investment opportunities, particularly smaller-sized businesses, what would you say?
BH: Have a well-defined, yet flexible and nimble business plan. Build a strong group of advisors with various relationships and expertise to help refine the business plan and continue evolvingit to maximize opportunities and minimize risks. Invest in building your team, brand and culture for long-term sustainable success.