When it comes to compliance issues, everyone that sees our fundraising documents and that requests meetings with us on Palico is accredited. The whole point of Palico is that it cuts down on complications and wasted time so that everyone is served better"
Moving mountains: The GP with multi-billion dollar ambitions
Star Mountain Capital has grand ambitions. When its CEO Brett Hickey left a career on Wall Street advising on mega mergers, he amassed a $20m fund with an altogether more modest focus: America’s lower middle-market. It was a decision that paid off and in 2010 Star Mountain was born.
Flash forward to 2017 and Hickey reached out to Palico, eager to forge new investor relationships. The firm had already found success applying its data-driven strategy to the inefficiencies of the lower-cap space. When Hickey learned of our equally digital-centric niche within the private equity industry, he listed the firm’s latest fund on the primary fundraising platform to see what we could deliver. The results speak for themselves.
Within days Hickey was fielding approaches from qualified LP institutions that were not previously on his radar, including a public pension fund in Asia. Each month the firm received expressions of interest from LPs of an equally premium calibre. Importantly, these were LPs with a firm interest in what Star Mountain had to offer.
“It really saved us time by ensuring that extensive, detailed information about our philosophy, tactics and track record went to investors with a stated interest in our strategy” says Hickey. “Because the investors who committed to our fund were able to screen us ahead of time, we cut through a lot of the extraneous meetings and correspondence that a general partner otherwise has to go through before getting to the meat of the business: profitable investing.”
Accredited investors only
Not only is Palico successful in matching funds listed on its platform with investors seeking related investment strategies, its vetting process ensures that secure channels of communication are only opened with accredited LPs. This makes the whole pairing process smooth and efficient.
“When it comes to compliance issues, everyone that sees our fundraising documents and that requests meetings with us on Palico is accredited. The whole point of Palico is that it cuts down on complications and wasted time so that everyone is served better,” says Hickey.
The listing of Star Mountain Diversified Small Business Access Fund II exceeded expectations, netting the firm several commitments. For Hickey, one of the standouts of this experience was that it helped to establish a diverse and uncorrelated investor base from around the world.
For all intents and purposes Palico has become a permanent extension of Star Mountain’s investor relations function. The firm’s IR executive also sits on the investment committee and plays a central role in reviewing deals. Palico has therefore been an enabler, sourcing new investments into the funds while allowing the firm to concentrate on what it does best: identifying high-potential companies run by exemplary management teams.
Culture, fit
Star Mountain is no ordinary lower-mid investor. In addition to making both direct debt and equity investments, the firm plays in the secondaries space, acquiring LP interests and direct assets. Since its founding in 2010 the firm has closed over 100 deals and a further 20 secondary transactions through its trademarked Collaborative Ecosystem.
A further differentiator is the firm’s early recognition of the importance of culture. Now a mainstream concept, Hickey has long promoted purpose-driven values and the outsized benefits this can have for small and medium-sized businesses. Companies that level up their governance and diversity typically attract better talent, which in turn delivers improved financial results and reinforces the culture, creating a virtuous cycle.
Hickey applies the same purpose-first mindset to his own firm. This explains why Star Mountain was named one of the Best Places to Work in 2020, not only by Pensions & Investments but Crain’s New York Business too.
These values are resonating with investors on the primary fundraising platform.“We raised capital quickly and closed our fund more rapidly than would have been the case without Palico,” Hickey summarizes. As of July the firm has US$2bn in assets under management and growing, exclusively supporting America’s high-growth lower-cap economy. Those grand ambitions are already being realized, then, with the assistance of Palico.