The trials and tribulations of sourcing, structuring, fundraising, and closing deals in the middle market.
CONUS
Joined April 2024
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We closed our first deal as an independent sponsor a few weeks ago. It’s a nice service business with good margins in a niche corner of the market. We’re in at a fair price with reasonable incentives for everyone involved. If we execute, we’ll do well. You might think that I’d write a thread espousing all the tips and tricks that we used to execute this acquisition.
That’s not this thread.
We’ve been at this for 3.5 years and just closed our first deal. Here are all the things I wish I’d known as a non-PE guy co-founding an IS firm. I have a small audience on X, but hopefully this is valuable to a handful of folks. If not, writing this was a good exercise for me to reflect through.
Sorry in advance. No sunshine and rainbows here.
Pathetic from the economist here
And his should not be the only head to roll economist.com/leaders/2026/1…
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Funless Sponsor retweeted
And his should not be the only head to roll economist.com/leaders/2026/1…
There is a subset of the PE world that earns a reputational stench for much of the industry. Given PE's entry into the IS world, we've encountered a few of the bad actors, and their behavior is inexcusable.
HOWEVER
Even from my IS viewpoint, founders/sellers themselves often behave quite poorly leading up to a transaction and after the transaction is completed. We see and hear about founders clutching their pearls after cashing an eight-figure check because their new PE partners won't allow them to run the business out of their back pocket anymore. The nerve of some investors...
When it comes to perception in the PE world, the founder is automatically the victim, regardless of the behavior leading up to whatever outcome is being framed. But when you're investing on behalf of other people, basic protections are required.
And PE often gets this reputation for slash-and-burn tactics. Squeeze every last ounce of blood from the stone before flipping the asset. And this happens in larger, upper-middle-market or MF deals at times.
But in the LMM? You must be joking. All of these businesses are under-resourced. The founders are wearing way too many hats. They all require heavy investment in personnel and infrastructure to handle the next leg up in performance. No firms are making a platform acquisition, then walking in to fire the office admin who knows where the bodies are buried. Doesn't happen.
It's a nebulous industry that often appears to be a zero-sum game. That's why it's easy to hate on the business. The industry could do better, but the reputation is out of line.
PE is just easy to dump on and make the bogey man. All sorts of public companies and family businesses also cut costs and at times make bad product or pricing decisions.
This isn't helped by some of the anon accounts on here that work in PE but dump on the industry....
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Funless Sponsor retweeted
Classy stuff from Nick Saban:
Curt Cignetti: "I learned a lot from my dad but never coached for him."
Saban: "Well I coached for your dad, and you learned a lot from him through me."
#iufb
Fun story. I used to do a little bit of work with a pool chemical distribution business. A portion of the business was repacking bulk pool shock into smaller pack sizes. Nasty, nasty stuff.
One day, the owner/CEO gets a letter from the county saying that two trash trucks burned in the lot one night. They dug through the remnants and found pool shock bags still smoldering. Provided pictures.
Yep, that was us.
Employees were already trained to dispose of pool chem containers in special dumpsters. But it was just too convenient.
Got out of it for $150k and a long apology. The owner was lucky. You cannot fully underwrite small businesses.
It’s 9am on a Tuesday, ten weeks after closing on a small pool maintenance and repair company.
You’re standing at the edge of a large commercial customer’s pool looking at green and black algae growing up the walls. The property manager is explaining, for the third time, that the algae was not there when the old owner ran the company.
Your phone rings. It’s Brad, the plumber three units down in your warehouse complex.
“Hey, your garbage just exploded. And there’s a weird smell out here.”
The shop is two minutes away. You tell the property manager you’ll call her back and you’re in the truck before she can answer.
You turn onto the street behind your shop and there’s a haze hanging over the warehouse strip. It’s drifting toward the houses behind it.
At the stop sign you google “can chlorine gas kill you.”
Yes.
You google “how much chlorine gas is fatal.”
You don’t love the answer.
You pull in and stand in the parking lot with your thumb over 911. If you call, they evacuate the neighborhood and your company name is on the 6 o’clock news. If you don’t call and somebody’s grandma ends up on a ventilator, it’s worse.
You call the old owner. Twenty years in the business. He’ll know.
“Huh. I don’t know. You should really get that CPO certification. Good luck.”
Click.
The cloud is starting to thin out. You pull up the security cameras and scroll back to when the guys loaded out. There’s Mitch getting his truck ready for the day, cleaning out his skimmer baskets. He dumps the wet leaves into an empty chlorine bucket, screws the lid on tight, tosses it in the dumpster, and drives off to his first stop.
You fast forward.
The bucket launches out of the dumpster like a mortar round. A cloud rolls up and over the fence.
You watch it three times.
Mitch doesn’t have his CPO either. Neither of you knew that a little leftover chlorine powder, wet leaves, and a tight lid make the thing they banned after World War I.
You think about the SBA loan. Your signature on the personal guarantee. The guy on YouTube who said pool routes are “the most passive business in America.”
You google “liability for chlorine gas release in a residential neighborhood.”
Then “does an LLC protect you from chemical weapons.”
Then you clear your search history.
The property manager texts: “Any update on the algae?”
Mitch texts: “hey boss can I leave early tomorrow”
It’s 9:20. Passive income.
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My son tried out for his high school basketball team three years in a row and got cut every time. He's a good kid, but he's five foot six and not very fast, and the third time it broke his heart. He'd practiced every single day that summer. He came home from the final cut list and went straight to his room. The next morning, the coach called our house and asked to talk to him. He said he had a problem.
Long shot here: anyone have an escalation contact at Trimble or Spectrum? Support is completely letting us down. Entire accounting system is completely stranded. I’ve never seen anything like it.
@TrimbleCorpNews
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I've been studying this extensively during our bedtime routine, and I must say, the man with the yellow hat is an absolute menace to society.
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Heading back from the ISF Chicago conference this morning. I continue to be surprised by the magnitude of new capital flowing into this space. Investors are tailoring structures to plug longstanding gaps in this corner of the market. It’s great and so much different now than when we started.
But my goodness there are a lot of new IS firms out there. I don’t envy the job of trying to separate the wheat from the chaff.
I think this will be a “winners take most” outcome. My gut says 10% of IS firms will execute 70% of deals. Or at least that feels directionally correct.
I've found that a lot of founders believe their businesses are extremely complex. It's a symptom of keyman risk.
It feels complex because the founder is doing everything.
The downstream effect is resistance to implementing processes and systems.
Tom Brady's call sheet from Super Bowl LI. The 28-3 comeback.
Every down, distance, and score the game could throw at him had an answer written down before kickoff. Color coded.
One of the best to ever play ran one of the hardest jobs in sports off standard work.
Meanwhile I still get told customer service can't have standard work. Too many variables.
If it fits on one laminated sheet for the Super Bowl, it fits on one sheet for your front desk.
Funless Sponsor retweeted
This post looks like the start of a VERY sophisticated and well-funded PR operation to get support for Democrats to regulate AI into oblivion. Let me show you how it works:
1.) This guy, with minimal followers and no previous account activity, goes to the Wall Street Journal which publishes an exclusive with quotes from him on his resignation 18 minutes BEFORE this post goes up. Planning was clearly done in advance.
2.) Within hours, it has tens of thousands of reposts and the account has 100k+ followers. The post is punchy, quotable, it almost seems professionally written. The first three accounts to quote tweet it all do so within 15 minutes of the initial posting. Remember, this account had basically zero engagement beforehand, so an organic reach explanation seems unlikely.
According to Grok those accounts are @_NathanCalvin (General Counsel at Encode AI), @peterwildeford (Head of Policy at the AI Policy Network), and @DKokotajlo (Head of the AI Futures Project), all of which are up-and-coming AI-Doomer policy advocacy nonprofits.
The AI Futures Project website says it is funded “primarily” by the Survival and Flourishing Fund, which says on its own website that it has advised Jaan Tallinn, Skype creator and one of the leading investors in Anthropic, to grant over $2.5 million to the AI Futures Project since 2024.
Encode AI says on its website that it is ALSO funded by the Survival and Flourishing Fund, which in turn says that it told Anthropic investor Jaan Tallinn to grant $516,000 to Encode AI in 2025.
And wouldn’t you know it, the Survival and Flourishing Fund ALSO says it told Jaan Tallinn to grant $2 million to the AI Policy Institute, the 501(c)(3) affiliate of the AI Policy Network, as well.
What are the odds that the first three quote tweets of Coxon’s post would all be major AI-restriction policy advocates funded generously by the same donor, who also happens to be one of the leading investors in, and a board member of, Anthropic, the company Coxon was resigning from? And all within 15 minutes of posting (two within ten)?
3.) Jacob Coxon doesn’t have much of a resume, but we do know that, in 2022, he got a $20,159 scholarship for the “long term future scholarship program” from the Good Ventures Foundation, one of the philanthropic vehicles of Dustin Moskovitz, a notorious AI-doomer who has spent tens if not hundreds of millions on policy advocacy to strictly regulate AI, while also being an Anthropic Investor himself.
It also just so happens that the 14th person to quote Coxon’s post was @MaxNadeau_ (27 minutes after posting) who is the program officer for the Technical AI Safety team at Coefficient Giving, another of Moskovitz’s philanthropic spending vehicles. Max is not a frequent poster, his last posts before quoting Coxon were before Labor Day, but he was remarkably quick off the mark for this one.
4.) Basically every major Democrat politician and candidate has suddenly glommed on to this post, and conveniently, as the people cry out foe answers, Bernie Sanders already has a bill written to “ban super intelligence” and regulate AI into oblivion, and will be releasing later this week. The bill, among many other things, will create “a new cabinet-level federal agency to safeguard the public from the dangers of artificial intelligence” that will be “advised by an Artificial Intelligence Advisory Board comprised of experts on artificial intelligence.” Do you think, perhaps, Anthropic and its many investors who fund AI policy advocacy might have interest in getting to place a pet “expert” on the board of an entity that dictates what AI is and isn’t allowed to do? And isn’t it fortuitous that this whistleblower came forward with his oh-so scary stories so close in proximity to the release of the most radical piece of AI legislation ever introduced?
