Trends Watch: Allocations to Private Equity

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Jeremy Holland, Managing Partner, Origination at The Riverside Company.

What is your outlook for private equity?

The outlook is bright.  We see LPs increasing their allocation to our industry, which is the highest form of compliment.  Additionally, management teams are realizing that working with a private equity firm can provide them equity incentive alignment that may not be as generous -- or exist at all -- from other capital sources when they are working with a family-owned business. Increasingly, management teams are also lobbying for a private equity owner instead of a large corporate, strategic buyer.

Where do you see the greatest opportunities and why?

I’m very excited about one of our non-control strategies which provides revenue-based financing to B2B SaaS companies. Entrepreneurs are just now learning about this new financial model which provides flexible capital to companies, maximizing alignment with business owners and management at the same time as minimizing equity dilution, and which offers an alternative to big rounds of venture capital with a moon-shot mentality.

There is a great opportunity for private equity firms to collaborate.  Historically, firms viewed each other as competition only.  We have been flattered to have our structured equity team be invited to participate in investments lead by other firms.  I expect to see more of this teamwork in the months and years ahead.

Where do you see the greatest challenges and why?

Talent.  The remote work environment has created a challenge in bringing new hires into Riverside’s culture.  These past months have been difficult having team members working remotely and away from each other.  We are a social bunch, and culture is best communicated and built in-person.  While a remote work environment may be efficient, it isn’t ideal.  We need to check in on each other, making sure people are taking breaks and not just working around the clock.

What keeps you up at night?

Cybersecurity.  I’m grateful for my colleagues in Riverside’s information security office, given the critical importance of their work.  In the entrepreneurial end of the market where we invest, we continue to see entrepreneurs with inadequate defenses in place.  I’m happy that we can implement best practices to help secure their businesses and protect their brands, while avoiding the costly consequences of a breach.

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.