Our team recently announced the formation of a new private equity fund, ParkerGale. You can click around the site here to find out more details about what we do and how we do it, but I wanted to explain the motivation behind the firm and why we thought now was the right time to launch. Our goal is to be accessible, transparent and friendly (maybe not the first adjectives that pop into your mind when you think “private equity fund”). Keep checking back to the Discussion here and listen to our podcasts. You’ll get a good sense of who we are and how we do what we do.
We Like Founders
We started our firm for founders and management teams building technology companies the hard way – with their own money. Not all technology companies raise venture capital. In fact, most don’t. But you wouldn’t know that from reading the popular press. How could you? It’s so much more fun to write about college dropouts hitting it big with some disruptive new technology. When a startup raises $100 million, that’s big news. And it should be. And these stories get more clicks and likes than ones about middle aged founders bootstrapping their way to a boring, profitable business.
We buy companies from founders. We are your exit, but with a twist. When you decide it’s time to sell, let us know. We buy a majority interest in your company, you keep a piece for yourself, and we help you and your team attack that next big push for growth. You get financial security and get to participate in the upside the future can bring. Your team gets equity in the business so that they can build wealth along the way, too. And we bring in a ton of resources to help you break through those sticky challenges all small companies face when trying to grow.
Why do we work with founder-owned companies? We like underdogs. Because when underdogs start to walk with a little more swagger, then the big guys need to watch out. That’s the kind of challenge we like. We also like it because founder-owned companies are in tune with the market, the team and the product. And there are a lot of things that we can do with the business that you just haven’t gotten around to yet, so we like the upside opportunity that creates for us as investors.
Over our careers, the ParkerGale team has given founders over $500 million in liquidity. And that doesn’t include the money they made alongside us after we invested. Which is a lot. We help underdogs win.
Small is Good
We are a small team. We don’t think private equity scales very well. When you have more money you either need to invest in more companies or invest bigger dollars per investment. So that means you either need more people or you need to change what you did before by going up-market. For us, there is high bar for adding more people. Everyone on our team started under someone else on the team at some point over the last 20 years and grew into our current roles over time. We like to grow our own so the culture seeps into the DNA and our investment philosophy and execution process become second nature.
We have a small fund. Big is the new black in private equity these days and while there are some excellent big funds doing great work for their investors, the race to can come at the expense of culture, focus, and performance. Staying small helps us keep the bar high on investment decisions and allows us to be picky. As for doing bigger deals, none of us are interested in that. The small end of the market is what we know, it’s what we are good at and it’s where we plan to stay. Staying small also makes sure we share the same goals as our investors: turn small companies into big companies and small investments into bigger ones. When that happens we all do well.
We buy small companies. Don’t take that the wrong way. By small, we mean a few million in profits and growing fast. We like small companies because they all face similar problems – how to scale growth, how to keep up with technology changes, how to build out a team that has the same culture and ambitions as the early employees. We know how to help small companies navigate these issues and we are confident enough in our abilities to put up millions of dollars to do it. Over the years, we’ve had a lot of success after a lot of hard work, hopefully some humility and a healthy dose of good luck.
The Market Is Coming our Way
Let’s start with what we are not. We are not venture capital, growth equity or debt. Our money goes into owners’ pockets, not companies’ balance sheet. The companies we buy don’t need capital, their owners want liquidity and some help building the business. We fit in between the venture world and the public company space. We think there are about 60,000 private technology companies in that segment across North America, most of them pretty small and great fits for our business. We just need to find two or three of them a year for our investment model to keep pace.
In the technology sector, you’ll see tons of venture capital, growth equity, middle market and large buyout funds. A lot of these firms are becoming brand names. But there are very few firms solely focused on small technology buyouts. When we do compete with some of these other funds for new investments we think that’s great. It’s great for founders because they get more choices. It’s great for limited partners because they get to see who the really good investors are. It’s great for us because it makes us better when we have to compete for business and even better for us down the road because we have more, bigger funds to sell our companies to eventually.
We Love Chicago
We have always known that Chicago gives us an advantage investing in technology, it’s just taken twenty years for the rest of the country to figure it out. First, we are outside the vortex. San Francisco, Boston and Austin are great places to visit, but trying to stay dispassionate while investing when you are deep in the tech fog isn’t easy. Chicago has just enough heat to build a great network of techies, but we have just as many friends who’ve never used Uber or heard of Slack. We think that’s healthy and keeps us grounded.
And New York? Well, the cost of living is so high and the dollars sloshing around the PE world are so big, that I imagine it’s tough to run a small fund strategy without feeling inadequate. Our fees just don’t let you roll like the big boys do in NYC so the pull to get big must be mighty powerful. I do love the pizza there, though, and they eat it the right way: pizza is meant to be folded, not eaten with a knife and fork. Sorry Chicago.
Second, we can get anywhere easily and anywhere can get to us. We live on planes and Chicago gives us a short direct flight to anywhere. And that adds up over time (especially for the older guys on the team) so when you are on your 95thsegment of the year and you can do a day trip to Denver instead of another night at the Hyatt Place it helps. It’s the little things when it comes to travel. Believe me.
Third, people in Chicago root for each other. Over twenty years doing this, our network of folks who believe in us and want to help is massive. Sure, it’s a Midwest thing, but relationships matter here and Chicago is still small enough that people know if you are one of the good guys or not. And over those years we have built an unmatched network of advisors, service providers, consultants, executives, vendors and friends that tap into for connections and work at portfolio companies. And this is the secret to us being able to punch above our weight as a small fund.
Fourth, have you been to Chicago lately? We are absolutely crushing it right now when it comes to the things that really matter – restaurants, art, theater, music, public parks. Man is it a great time to be living in this city.
We Are a Team
I left this for last just because I would have teared up and not been able to finish this post if I started with it. I’m the crier on the team (I cry just thinking about The Natural). There isn’t a more fun, smart, irreverent, hard working and passionate group of people in private equity than the team here at ParkerGale. We love what we do. We love doing it together. And we are pretty darn good at it, too. We know what each of us is good at, and can anticipate each other’s moves. We challenge each other, we cut each other slack, we know how to argue and we know how to make up. We all like fixing things things and we like to win the right way even if that means we might miss a few winners along the way. And we work to build and maintain our culture because it’s not something that just happens. Culture is deliberate and it requires constant vigilance from everyone on the team.
We Picked a Name that Tells Our Story
I guess we should have expected this, but it’s the first question we get – what’s ParkerGale? Early in Frank Lloyd Wright’s career he designed two houses for the Parker and Gale families in Oak Park, Illinois. He used these successes as the catalyst to launch his own architecture firm in 1893 along with few colleagues who shared his vision and ambition. At ParkerGale, we are tapping into that same spirit to use the lessons from our past to build a firm for the future.
Ambitious? Yes. But those are our aspirations. And we intend to deliver in our own, small way. Come along and be part of it with us.