The new wave of women-led PE firms

Since the pandemic, a number of highly regarded women dealmakers have made the choice to leave their established shops and take the entrepreneurial plunge in starting their own private equity firms.

Before then, the number of firms led by women was negligible. But over the past year, that activity has ramped up. In February, Coalesce Capital, led by ex-Warburg Pincus dealmaker Stephanie Geveda, closed its debut fund on $900 million less than a year after launch, beating its $750 million target (see her Q&A). Coalesce is part of a wave of women-led firms seeking capital.

“When you look at the prominent examples of the past few years, you have rockstar women who are spinning out with top-tier investment track records”

Elizabeth Browne, GCM Grosvenor

“Until five or six years ago, you didn’t really have tangible examples of women founders who were scale success stories in buyouts,” says Elizabeth Browne, managing director at GCM Grosvenor who focuses on seeding emerging firms, including diverse managers.

“[Potential] founders who have entrepreneurial ambitions are especially incentivized and motivated to do it in today’s market context, they know these are likely to be productive vintages for private equity and therefore the best possible time for them to set up under their own shingle,” she says.

Helping drive momentum is the example set by specific women founders who helped lay the foundation for future entrepreneurs, like Luminate Capital, led by ex-Silver Lake dealmaker Hollie Haynes.

“When you look at the prominent examples of the past few years, you have rockstar women who are spinning out with top-tier investment track records,” Browne says.

Simply put, more women moving into higher ranks of dealmaking means that, inevitably, more of them will consider forming their own firms.

15%

Percentage of managing-director-level investing roles held by women globally, according to a 2023 McKinsey report

“I’ve been pleasantly surprised by how much has changed in the last 12 to 24 months. We’re really starting to see a spark of firm and fund formation,” says Marcia Page, founder and chief executive of MPowered Capital, which backs emerging and diverse managers.

What is happening now is a confluence of those factors – more women in senior roles and increased firm formation. According to some sources, the industry is in the early stages of diversification that will be pushed by more women and minorities leading the way at their own shops.

“That’s why we’re seeing a whole new group of fund managers now. We’ve been talking about the industry increasing diversity for a number of years, but it takes time for those efforts to bear fruit in terms of women and other diverse professionals reaching senior ranks and being in a position where they could realistically and credibly raise their own capital,” says Kerstin Dittmar, founder and managing partner of L2 Point Management.

Pioneers

Data around women-led private equity fundraising is scant. Firms with at least one female fund manager raised about $31.5 billion last year, according to research from PitchBook.

That was up from the $13 billion collected by such firms in 2022, and the $8.3 billion raised in 2021, the data provider found.

“It’s not just creating policies, but all of us supporting each other”

Leigh Sansone, Paceline

The numbers seem to indicate that more women are pushing into higher dealmaking ranks at PE shops. To launch a new firm, general “table stakes” include an established track record of investing and a network of potential investors – traits that come with leading deals.

But even with a great track record and network, any emerging manager needs support and capital. What has emerged is an informal network of women founders willing to support new managers.

This network is proving to be advantageous for women in what many say is the most challenging fundraising environment ever, especially so for new managers and first-time fundraisers.

“Part of the reason this network is so powerful is that it’s still quite small, there aren’t that many women who have gotten to that level,” Dittmar says. “The women who have are eager to help.”

Dittmar spoke with Haynes, founder of Luminate, early on as she considered forming her own shop. “There’s no batphone to call, but it’s certainly a small enough group that word spreads around and everybody makes sure you have the right connections and support.”

LP backers

Helping to grow the fledgling diverse-led PE community are investors and limited partners that specifically target these managers.

Several firms have emerged in recent years, like Grafine Partners, Daraja Capital and MPowered. These newer shops have joined already established investors with programs to target emerging and diverse firms like GCM Grosvenor, StepStone, Hamilton Lane and Fairview Capital.

“There’s no batphone to call, but it’s certainly a small enough group that word spreads around and everybody makes sure you have the right connections and support”

Kerstin Dittmar, L2 Point Management

Access to capital is a major challenge in the launch and growth of a diverse firm because of the kind of biases these managers face, sources say.

“Who do you take a leap of faith with? Usually people who you’re comfortable with, who you know, who fit your profile of what you think a great investor is,” says Raudline Etienne, founder and CEO of Daraja Capital. “If that profile is mono-culture, mono-gender, naturally it’ll be more difficult for a diverse manager to raise capital.”

It’s not just capital for a debut fund; it’s also vital that a newer manager that is able to raise a first fund can grow and raise subsequent funds. Firms that work with emerging managers usually focus on not just supporting first-timers, but also on working with new managers to scale.

“I’ve been pleasantly surprised by how much has changed in the last 12 to 24 months. We’re really starting to see a spark of firm and fund formation”

Marcia Page, MPowered Capital

MPowered works with firms by providing several types of investments, including working capital, fund commitments and participating in direct deals and co-investments on pre-fund deals. “We help them build their attributable track record ahead of launching their fund,” Page says.

Daraja provides similar support, including expertise to firm founders. “Our model is to provide capital in a flexible form; we’ll help with the GP commitment, working capital, on occasion we’ll invest as an LP, it depends on what’s needed,” Etienne says.

Culture

Diverse-led firms tend to grow diverse organizations and invest in and support diverse businesses. Female venture partners invest in 2x as many female founding teams, while US startups with at least one founder go on to hire 2.5x more women, according to research from Kauffman Fellows.

Building a diverse culture is generally part of the anatomy of a diverse-led firm, but practice is more powerful than policy.

An example is Paceline Equity Partners, which closed its debut fund on $350 million in 2021. The firm hired its first investor relations chief, Sterling Donnelly, in 2022. Paceline co-founder and CIO Leigh Sansone played an active role in making sure she came on, even helping Donnelly find a place to live in her relocation from New York to Dallas.

“I have no family here, no friends, but I have my Paceline family,” Donnelly says. “[Leigh] was there for the open houses. She realizes that matters, that if I was happy and found the perfect place to live, the choice would be easier. These are intangible things you can’t really build into a policy, it’s the act of doing it.”

Sansone explains: “It’s not just creating policies, but all of us supporting each other, senior women or mid-level women who have families or family thoughts, we’re going to support her during that time. And it’s men and women, and vice versa, when men have things they need support on we’ll support them.

“We’re not afraid to say these are what our needs are, and everyone responds really well. When you build a firm from the ground up, that’s what you can do.”

Women setting up shop

Recently opened firms, and their founders

L2 Point Management Kerstin Dittmar

Prelude Growth Partners Neda Daneshzadeh and Alicia Sontag

Citation Capital Tiffany Hagge and Lydie Hudson

Clearhaven Partners Michelle Noon

Vertu Capital Lisa Melchior  

Grafine Partners Elizabeth Weymouth

HarbourView Equity Sherrese Clarke Soares

Emerald Bridge Capital Cay Freihofer

Astira Capital Azra Kanji