James Bohannon says family capital's hallmark is flexibility because the money isn't bound by a fund's deployment and redemption schedule.
Belzberg & Co. targets cash-flowing, easy-to-understand old-economy US businesses, from consumer services to franchising.
Bohannon says independent sponsors are stepping in as $2-20bn PE founders in their 50s stay for carry and 32-year-olds six layers down buy businesses instead.
Family capital is the patient money behind independent sponsors
Family capital is the natural counterparty for independent sponsors. The money belongs to a person, so it can hold a business for years and fund add-ons without a fund's redemption clock . That patience matters because the supply of sponsors keeps growing, since partners at $2bn to $20bn funds are not leaving before their carry pays and the people below them would rather buy a company . Belzberg & Co. sits on the other side of that trade, backing cash-flowing old-economy US businesses it understands .
Takeaways
Flexibility is the hallmark of family capital. The money belongs to a person and is not bound by a fund's deployment and redemption schedule, so a family can wait or add on . Families without the equipment that do direct or venture deals get their faces ripped off .
Belzberg backs cash-flowing old-economy US businesses. Belzberg prefers cash-flowing, easy-to-understand old-economy US businesses, including consumer services, business services, shipping logistics and franchising . Deals outside that mandate still go through discussion, an IC process, a document and references .
Focus matters more than breadth. Bandwidth and focus decide outcomes, and an office not mostly concentrated on what it is good at spreads too thin . Berkshire never flexed on honorable people and good management teams but flexed on the businesses it bought .
Families choose how much to do in-house. Options run from outsourcing to consultants, funds of funds, in-house funds, co-investments and direct deals . Co-investing with independent sponsors is the middle ground, less work on sourcing and management but real diligence and possibly a board seat .
PE's logjam feeds the independent sponsor market. There are thousands of funds sized between $2bn and $20bn . Their founders, in their 50s, are not leaving before a payday , and 32-year-olds six layers down wait seven or eight years to be paid .
Raising family capital is dating with diligence. The best route is select, thoughtful conversations with families, who then introduce a sponsor to a couple more, one by one . Diligence runs both ways, so ask who the decision maker is and what their incentive is .
Alignment means the sponsor bleeds too. An LP writing a $10m check wants the sponsor to bleed when the LP bleeds and to get rich on a 5x . Minimum returns are debated at 2.5x or 3x , and a 2.2x net result makes people persnickety about sponsor pay .
How Belzberg & Co. was built
Sam Belzberg knew a bank would liquidate his asset pool for pennies on the dollar, so he asked his son-in-law Strauss Zelnick to preserve it and carry on the business .
Belzberg & Co. opened in 2018 as two or three families connected through marriage under the single family office exemption, with another leg of the family a well-known Canadian name .
