Thayer Street Partners is a boutique private investment firm that provides flexible growth capital to technology-enabled financial, real estate, and business services companies in the lower middle market. Pulse 2.0 interviewed Thayer Street founder & managing partner Josh Koplewicz to learn more about the firm’s history, investment strategy, and goals for the future.
Josh Koplewicz’s Background
Koplewicz started Thayer Street Partners roughly a decade ago after working at Goldman Sachs in an on balance sheet investing group called the Special Situations Group (SSG). Koplewicz said:
“SSG was my first job after I graduated from Brown University. During my time at Thayer Street, we’ve focused on providing flexible growth capital solutions to predominantly recurring revenue businesses in the financial services, real estate services, and business services sectors that are often tech-enabled or “modernizing” through the adoption of software or technology.”
Industry Focus
What are some of the industries that Thayer Street is focused on? Koplewicz explained:
“We target recurring revenue businesses in the lower middle market that are well-positioned to benefit from long-term growth tailwinds and low correlations to economic cycles. These businesses are often in sub-segments that are highly fragmented with a lot of room for consolidation or limited institutional ownership. Some of our investments benefit from an evolving regulatory landscape or long-term changes in user or customer preferences related to relatively essential or ‘sticky’ services. Examples include elevator maintenance and emergency monitoring, marina operations and other niche storage categories, and various types of B2B software and specialized payments businesses.”
Differentiation From Other Firms
What differentiates Thayer Street from other firms? Koplewicz emphasized:
“I would say three of our biggest differentiators are 1) our willingness to start small and early, 2) our limited use of leverage and financial engineering, and 3) our investment structuring and the format of our working relationship with a business. We operate with a business owner mentality and often provide companies with their first institutional capital or incubate asset aggregation platforms from scratch in partnership with existing operators. From there, we take a long-term approach to creating value – our hold periods and monetization windows can be pretty flexible. We are focused on creating a ‘win-win’ between capital and company over the long-term.”
Significant Milestones
What have been some of your firm’s most significant milestones? Koplewicz cited:
“Earlier this year, we closed our second opportunity fund within a challenging fundraising environment. With total Fund commitments in excess of $275 million, we exceeded our fundraising target and benefited from strong support from existing and new LPs, we’re very proud of that. In addition, we’re now approaching approximately $1 billion in RAUM, have completed over 30 deals to date, and are currently scaling our team (on both the investment and asset management side).”
Challenges Faced
Have you faced any specific bottlenecks in your sector of work recently? Koplewicz acknowledged:
“We’re seeing a much more challenging lending environment. The availability of debt has declined and what is available is expensive and quite rigid. This lending dynamic appears to be creating an opening in the market for the type of creative structured equity solutions that we spend a lot of time on. If businesses want to use their cash flows to support further growth, these less dilutive structured equity solutions have a significant role to play and can help businesses plug the gap, particularly in the lower middle market and middle market.”
Investment Success Stories
When asked about investing success stories, Koplewicz highlighted:
“We were early investors in a real estate billing and payments business called ClickPay. Over the course of the investment period, we executed a series of creative follow-on investments, designed to address the needs of both Company management and existing shareholders, which left us as the Company’s largest shareholder. During the investment period, we were able to leverage our network within the real estate management community to make valuable new customer introductions that resulted in significant revenue growth. We also assisted the Company in working through key challenges specific to the payments industry that come along with the process of scaling. Ultimately, the Company was acquired by RealPage (formerly a public company that was later acquired by Thoma Bravo).”
Future Goals
What are some of Thayer Street’s future goals? Koplewicz concluded:
“We’re focused on deploying more flexible growth capital, building new institutional platforms, and helping our portfolio companies execute their various plans. There are a few platforms within our portfolio that we believe have notable opportunities to scale over the next 18-24 months and we’re really excited to support them.”
