What Is An Independent Sponsor?
Endeavor Technology Group (Endeavor) is an Independent Sponsor, for many of you, we may be the first interaction you’ve had with this particular investor model. Endeavor is different. We’re proud of that. We’ve seen the way the market works. As individuals, we’ve excelled in more traditional models in the past. That experience, though, showed us that we can do better. One of our differentiators is our business model. Endeavor has purposely chosen the Independent Sponsorship model, as we believe it allows us to be a better partner to our portfolio companies and our investors.
In that vein, we’d like to put forward a brief Q&A that will hopefully address those questions that might be “top of mind” regarding the Independent Sponsor model.
Q: What is an Independent Sponsor?
An Independent Sponsor is an individual or group that identifies, sources, and executes private equity transactions without the traditional backing of committed capital in a dedicated fund.
Q: How is an Independent Sponsor different from a traditional Private Equity Firm?
Unlike conventional private equity firms, an independent sponsor does not manage a pool of committed capital; instead, we raise funds on an as needed, deal-by-deal basis from a variety of investors, including high-net-worth individuals, family offices, and institutional investors.
Q: What are some of the attributes of the Independent Sponsor model, as it relates to sellers, that attracted the Endeavor team?
First and foremost, flexibility! Independent Sponsors can offer a level of flexibility that traditional private equity firms may find challenging to match. We can tailor investment strategies and structures to meet the specific needs and goals of each transaction, rather than adhering to a rigid fund mandate. Operational Involvement is also key. As an Independent Sponsor, we will be more hands-on in the management and growth of our portfolio companies. Direct involvement can contribute to enhanced operational efficiency, strategic planning, and overall value creation. In the case of Endeavor, we find we are best matched with owners who are looking for that direct involvement to move through a key inflection point in their Company whether it be strategic, financial or operational in nature.
Q: What are some of the attributes of the Independent Sponsor model, as it relates to investors, that attracted the Endeavor team?
The Independent Sponsor model allows for Endeavor to create alignment between investors and management in a way that can be unique. In most cases, owner/operators, Endeavor, and the individual equity investors will all hold a stake that is meaningful to them in the growth and success of the business. This alignment is a key building block, all stakeholders are bringing their respective resources to execute on the purpose and mission of the platform. For investors, Independent Sponsors such as Endeavor are focused on leveraging their expertise, extensive networks, and market insights to identify attractive investment opportunities that would not typically be available to them. In our case, we become the investor’s outsourced National Security team. This approach enables them to focus on sectors they are knowledgeable about, potentially leading to more informed investment decisions.
Q: Is the transaction for an Independent Sponsor different from that of a Strategic or Private Equity buyer?
An Independent Sponsor is going to run through the same investing process steps to include: deal sourcing, due diligence, deal structuring, execution, value creation, and exit. There are a few notable caveats to these steps which are unique to the independent sponsor. The first, securing the necessary funding, Independent Sponsors are securing their equity and/or debt financing in a parallel process to the transaction process, whereas both private equity and strategic buyers are most likely only working through a debt financing process. Endeavor has put in a lot of time and effort into making this parallel process as efficient and timely as possible. Second, during the value creation phase, an Independent Sponsor provides much more hands-on guidance than a larger strategic or private equity firm would have the bandwidth (or desire) to perform. Finally, the exit strategy: an Independent Sponsor has the ability to exit the investment on a timeline that is decoupled from more traditional fund mandates – allowing for all stakeholders to partake in the timing and valuation decisions to be made.
Q: What are Endeavor’s favorite aspects of being an Independent Sponsor?
Sometimes being an Independent Sponsor is hard, primarily because most sellers have not encountered many, or any of us before; as such, an educational hurdle needs to be overcome. However, the entrepreneurial spirit involved in being an Independent Sponsor is thrilling. Endeavor’s hands-on involvement and ability to adapt quickly can contribute to more agile and effective decision-making within our platforms. It is a way to continue to create meaningful impact on our National Security mission while providing life changing liquidity events for founders and investors alike. We invest in areas where Endeavor has deep expertise, we remain highly focused on building a team at Endeavor that is committed to our National Security mission, has significant domain expertise, is diverse in both thought and experience, and agile. It’s an exciting team to be a part of, and we are just as excited to focus our energy and knowledge around the problems you care most deeply about at your company.
Endeavor is one of a limited number of Independent Sponsors focused on investing within the National Security industry. Mark Mykityshyn, Endeavor’s Managing Partner, has brought together an incomparable group of Principals and Business and Technical Advisors that are thrilled to plug into new and growing companies. We are also able to bring our industry expertise to a broader base of equity investors, who may not have the in-house knowledge and operational experience to confidently invest in this space on their own. When we combine this exciting business model with such an excellent and broad team the result is a one-of-a-kind organization.
The Endeavor model is specifically tuned to bring the best value as a partner to both companies and investors. Experience has taught us that the traditional, private equity fund-backed models are ok but could be better. Endeavor is that “better”. Check us out. We’re always happy to talk to others that share our passion for this mission and our unique place in that ecosystem.