Skip to content
a close-up of a fish

PE Impact Investing in Lower Middle Market Technology & Business Services

Jul 13, 2023

In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Director, Publications, EisnerAmper, speaks with Justin Kulla, Partner, Head of ESG and Impact Investing at TZP Group, a private equity firm focused on investing in lower middle market technology and business services and consumer products and services companies in the U.S. and Canada. Justin shares his outlook for impact investing in those spaces, including the greatest opportunities and challenges, how the firm incorporates DEI and more.


Elana Margulies Snyderman:
Hello and welcome to the EisnerAmper podcast series. I'm your host, Elana Margulies Snyderman. And with me today is Justin Kulla, partner, head of ESG in impact investing at TZP Group, a private equity firm focused on investing in lower middle market technology and business services and consumer products services companies in the US and Canada. Today, Justin will share with us his outlook for impact investing in those spaces, including the greatest opportunities and challenges, how the firm incorporates DEI and more. Hi Justin. Thank you so much for being with me today.

Justin Kulla:
Hi Elana.

So Justin, to kick off the conversation, tell us a little about the firm and how you got to where you are today.

So the firm has been around for 15 years. We were founded really on the principle of helping founders and management teams build their businesses, and we call that partner of choice. The firm has backed 60 founding teams to date, 30 in our current credit portfolios. And we continue to do what we've always done, which is support companies with capital and with capability. We invest out of both buyout and growth equity fund strategies. And I joined to launch our impact investing fund strategy, which invests across those verticals. From impact perspective, we invest in three main areas. One is connecting education, employment, financial inclusion. The second is investing in mental and behavioral health. And the third is unsustainability services.

As a broader platform, the firm really splits its attention between consumer and tech enabled business services. And that kind of breadth has allowed us to really get a lot of different experience looking at different business models. And helping out different companies through different business issues and business cycles. We've built out a very strong operational capability recognizing that businesses at this level really need to invest in a core set of competencies around people, sales and marketing, data finance and technology. And so we built an in-house capability to really help those companies get to the next level. And for impact investing, this is a relatively new idea in deploying capital at this lower mid-market level.

Great. Justin, given your focus on impact investing and technology, business services and consumer products and services companies, love to hear your overall outlook for this space.

Most people misunderstand impact investing. They think it's a marketing concept. For us, impact investing is really an economic concept, which is that there's all of these groups out there that have been fundamentally underserved. Either because they've been marginalized, discriminated disadvantage and the goal of impact capital is to find those underserved groups and match that underlying demand with supply and doing that aligned to a United Nations sustainable development goal. Unfortunately, there's a lot of problems out in the world, problems around food, in and out the environment around health, gender, equality, education, a whole variety of issues in the US and around the world.

And our job and impact is to find investible opportunities, market-based solutions to some of those problems. And so because those problems exist in the world. We see opportunities in a lot of different places. So unfortunately because there are lots of problems, we see a growing outlook for investing in those solutions. We know that there will be solutions by governments in some context and that there will be solutions by nonprofits for other solutions. But most of the solutions will come from the private market and our goal is to find companies that are doing that at scale in the lower mid-market.

Great. Justin, on the other hand, impact definitely has its challenges and would love the opportunity to hear some of the challenges you face and what you do to overcome them.

Impact investing is still a new domain and because it's evolving, the industry is developing its own nomenclature, its own standards for measuring outcomes and certainly its own pools of capital. Impact investing is not monolithic. And so capital that cares about one area like education may not care about another area like healthcare. Some pools of capital are really specific, they care about certain geographies or certain sub-verticals within an industry. And because of that impact investing is not one thing. And so as an impact investor, it's really about finding supportive capital to meet investible opportunities for a fund strategy that we know how to execute. And so what we've done at TZP is carved out three broad areas that are non-correlated with each other and non-correlated with the broader economy. But that's constantly changing. And so the sensibilities of yesterday are going to be different than the sensibilities of tomorrow.

And we see that in practice right now that there's strong demand coming in to the impact world for sustainable opportunities. And we think that those will continue to grow, but that's different than it was 10 years ago and we expected that will be different in 10 years time. And so impact investing is very dynamic and so there's lots of changing interests in this space. Measuring outcomes is also something that the industry spends a lot of time thinking about. We want to show that the social outcomes are as important as the financial outcomes. Now, I think the way that has been evolving in the impact space is really for impact investors to align as closely as possible the social outcomes with the revenue models of the businesses. So the more good that is performed by the business model, the more the company grows. And when those things work hand in glove, the social outcomes and the business model, that can represent a really good investible impact opportunity. And where those things diverge, it becomes harder to prove that the company is having the kind of social outcomes that are aligned with financial performance.

Justin, to shift gears a little bit, wanted to discuss DEI, which is also a very prominent topic in the industry and wanted to see how your firm is addressing this.

DE&I is a really important topic for us. At TZP ESG and impact are different but complimentary and D&I falls into our ESG program. ESG for us is defined as a toolkit for all of our businesses as a way to de-risk and unlock value in the medium and long term. Taking into account all the stakeholders that affect the business. And we think D&I is a topic that's relevant to all of our businesses no matter what they do, whether it is a focus on providing world positive products or services or any other business. We also think about it as relevant to our own firm. And we've made a number of different investments and to D&I efforts believing that it's really critical to how we operate and making us really great orders of assets and an employer of choice. We started with an intern to analyst program, which is focused on bringing new talent into the financial services space all the way from college. This is a big investment for a firm of our size, and the goal is to train college students to become an investment professionals from the beginning.

We started the program three years ago and have had our first class matriculate to analysts, and the program has grown. We will be welcoming our third class this summer, and we are committed to recruiting from colleges across the country and from colleges that are not typically focused on in the private equity landscape, believing that talent is resides everywhere. And that we really want to reach different perspectives from people who live in different communities with different ideas about where investible opportunities are. We know that we live in a very dynamic market and that bringing in fresh perspectives is going to make us a better investor. But we've done a lot more than that. In addition to our interns and analyst program, we have committed to thinking about us as investment professionals in a broader context. We've implemented a social justice reading that we do every week.

Our TZP Cares foundation that we established more than a decade ago invests money that is donated by all the investment professionals and staff at TZP Group into nonprofits around the country that are designated by our portfolio companies. And one of the things that we recognize by the different D&I efforts that we've engaged in is that that set of behaviors and activities has really informed not only the composition of our own staff, but also how we've created an open door for investments. In our inaugural impact report we recognize that six of the last nine investments we made in 2021 were by founders or management teams who were women. That was pretty unusual in the private equity world and not something that we had done by design, but we were happy to see that happen in effect. And we think it happened because we created this environment where we want to be open to great businesses run by talented founders and management teams, and we see that reflected in our management teams and within our company as well.

Justin, we've covered a lot of ground today and wanted to see if you have any final thoughts you'd like to share with us.

Impact and ESG, although it might change in their nomenclature in how they're defined in practice. I think we'll be around for a very long time. It is good sense to invest in businesses that are less risky, which is how we think about ESG. And it is good sense to invest in areas that require market-based solutions to problems. And because of that, we think that more capital will come into this space, and we think that there are going to be more creative entrepreneurs and management teams who are going to create market based solutions to problems. So impact investing is going to be a very active and exciting area for the firm, and I think for the industry going forward. And it's going to bring in new talent and new ideas, and then new toolkits as well. And so for everybody who's excited about that, I encourage them to participate in this industry to help define it because it is just starting and growing. And it's worthwhile because at the end of the day, you get to lend your time to making the world slightly better through investment and business.

Justin, I want to thank you so much for sharing your perspective with our listeners.

Thanks for having me, Elana.

And thank you for listening to the EisnerAmper podcast series. Visit for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.

Transcribed by

What's on Your Mind?

a man in a suit smiling

Elana Margulies-Snyderman

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

Start a conversation with Elana

Receive the latest business insights, analysis, and perspectives from EisnerAmper professionals.