Sidereal Capital, shifting out of deal-by-deal mode, targets debut fund

Even with a sluggish fundraising environment, some shops are bringing debut funds to try to loosen the purse strings of extra-stingy LPs.

The current fundraising market might be the most challenging to first-timers and emerging managers since the global financial crisis.

“It’s definitely a tougher path for emerging groups and first-time funds in this environment, no question,” said a fund-of-fund LP who backs emerging funds.

The 2022 Buyouts Emerging Manager Survey, conducted by Gen II Fund Services, underscored the challenges. It found almost two-thirds of respondents agreed or strongly agreed that LPs are hesitant about backing first-timers. A mere 15 percent disagreed.

Still, even with a sluggish fundraising environment, some new shops are testing the market to gather capital from limited partners.

One such shop is Sidereal Capital, which recently launched its debut fund targeting $200 million for investments in manufacturing and business services, according to sources and documents from the Chicago Firemen’s Annuity and Benefit Fund.

The firm formed in 2012, investing on a deal-by-deal basis, amassing a portfolio of seven pre-fund deals, the documents said. The firm looks to invest $8 million to $25 million in family and founder owned companies with EBITDA of $3 million to $10 million, the firm said.

Recent deals include Palmetto Adhesives, which makes hot-melt and water-based adhesives; and EWASTE+, which provides IT asset disposal and collection services.

The firm is led by managing partners Jabbar Abdi, Ken Bryant and EJ Sloboda. Abdi formerly was a managing director at Cordova, Smart & Williams, before which he worked at GE Capital. Bryant formerly was a managing director at RLJ Equity Partners, and before that, Wicks Group of Companies. And Sloboda formerly worked at Wicks, where he worked on investments in the media and education sectors.

Bryant declined to comment about fundraising.

Other first-timers in the market include Coalesce Capital, formed by ex-Warburg Pincus executive Stephanie Geveda, targeting $750 million for investments on business services deals; and Bansk Group, targeting $1 billion for investments in consumer packaged goods.