Now fully capitalized at $40 million, Chicago’s SB Partners debut venture fund is aiming at a largely under-served market: mid-sized 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 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, while 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 New York-based Metropolitan TLC Holdings Inc., which produces educational materials.
The firm will continue to target manufacturers and service and distribution companies with both later-stage and buyout capital. More specifically, it will focus its investments in financial services, business services and educational services. Davis said such high-growth opportunities are not usually associated with either minority or ethnic management teams, but that the capital markets have still remained closed to them.
“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 require 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 throughout the U.S.
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.
Carolina Braunschweig can be contacted at Story Feedback.