The Return of PE Is Coming Later in ‘23

The Return of PE Is Coming Later in ‘23

This is an excerpt from Episode 90 of my podcast Startup Confidential, which goes live with new content on the 1st and 15th of every month. 

We are witnessing a temporary lull in private equity and V.C. investment in consumer brands. It won’t last, in part, because funds have too much dry powder on time clocks set by Wall Street LPs. They have to invest the money, or it will be returned and deployed elsewhere. 

Wall Street hasn’t stopped piling up these funds, is my point. 

And Wall Street does NOT like un-deployed cash any more than your personal financial advisor, which, in my case, is me. 

So, probably later this year, deal-making will accelerate. At least my PE sources tell me so. 

And so the craziness will start all over again, especially in the $50-$100M revenue range (that’s company revenue, not cash register sales). Otherwise known as the lower middle market. 

The one thing I’ve observed in my own client base (which sells below $50M annually on their books) and in the broader ecosystem is that well-managed businesses with decent gross margins and highly efficient, fan-based acceleration don’t need institutional investment at all. Dude Wipes. Skinny Pop. Seed money? Sure. Angels continue to help out here.

Generally speaking, I think PE doesn’t have access to the best of the best consumer businesses folks. They work either with financially stressed growth companies OR ones with incompetent/insecure founders. Oops. You’d think a smart consultant would not display anything like a critical judgment toward his client base. Well, I guess I’m stupid, then. Or just a bit too honest…

For the rest of my thoughts, listen to Episode 90 of Startup Confidential, and please subscribe on Apple Podcasts.

Dr. James Richardson

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