“Permanent Capital” as a Strategy for Values-Aligned Investing

by Tom Blaisdell

Much of the capital available to Small and Medium Enterprises (SMEs) around the world, especially in the U.S., is in the form of private equity. The majority of this capital is allocated via Private Equity (PE) firms that are generally structured with 10-year terms, and the investment target is 3x to 5x return in 3 to 5 years on each investment they make. This model has worked well for both investors and companies based on the growth of the amount of capital that is deployed in this manner and the impressive returns these PE firms have delivered as a class.

There is, however, a class of founders/ entrepreneurs/CEOs for whom this model is not a great fit. These “legacy entrepreneurs” are not building companies solely for the purpose of “maximizing shareholder value.” Instead, they have a sense of purpose or mission to serve a customer or address a problem or need. Read the rest on the FDI site.