Our Approach
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- Our Approach
The Gen3 Approach
- Recurring and contractual revenue streams – Annual revenues over $5.0 million
- Annual EBITDA over $1.5 million
- Cash flow positive for three years +
- Low ongoing capital expenditure needs – Profit margins of 15%
- Strong middle management
- Private and concentrated ownership (70% +)
- Motivated sellers
- Opportunity for Principal to add value
- High operating leverage
- Low customer concentration and churn
- Commercial customers
- High organic growth potential
- Large, fragmented market
- High contractual customers (recurring revenue) – Non-cyclical
- Competitive barriers w/ IP
- USA headquartered, but can have a multi-national arm of the business
Financial
- Recurring and contractual revenue streams - Annual revenues over $5.0 million
- Annual EBITDA over $1.5 million
- Cash flow positive for three years +
- Low ongoing capital expenditure needs - Profit margins of 15%
Business
- Strong middle management
- Private and concentrated ownership (70% +)
- Motivated sellers
- Opportunity for Principal to add value
- High operating leverage
- Low customer concentration and churn
- Commercial customers
Industry
- High organic growth potential
- Large, fragmented market
- High contractual customers (recurring revenue) - Non-cyclical
- Competitive barriers w/ IP
Geography
- USA headquartered, but can have a multi-national arm of the business
What We Look For
With committed capital from family offices and without the typical constraints of a traditional private equity fund, Gen3 and their Equity Partners have the ability to provide patient and flexible capital for liquidity or growth along with a long-term approach to building and growing businesses in partnership with its founders and management.
- Opportunity to invest $5 – $30+ million per transaction
- $10+ million in revenue or bookings
- History of, or a clear path to, profitability
- Typically first-time institutional capital
While we prefer to acquire majority stakes, our mandate is flexible:
- Majority or control transactions
- Structured equity
- High operating leverage
- Low customer concentration and churn
- Co-investments
- Recurring or repeatable revenue
- Strong gross margins and unit economics
- High levels of cash conversion
- Attractive reinvestment characteristics
- Long-term sustainable growth
Our team has the flexibility to invest in a wide array of industries but we have prior experience in the following sectors:
- Vertical-market software
- Communications infrastructure
- Multi-site healthcare
- Business services
- Tech-enabled and information services
- Value-added distribution
- Many Others
- Founder liquidity
- Internal growth initiatives
- Acquisitions and industry consolidation
- Start-ups or early-stage companies
- Turnarounds or deeply distressed situations
Size & Stage
- Opportunity to invest $5 - $30+ million per transaction
- $10+ million in revenue or bookings
- History of, or a clear path to, profitability
- Typically first-time institutional capital
Investment Types
- Majority or control transactions
- Minority recapitalizations (with appropriate governance)
- Growth equity
- Structured equity
- High operating leverage
- Low customer concentration and churn
- Co-investments
Business Models
- Recurring or repeatable revenue
- Strong gross margins and unit economics
- High levels of cash conversion
- Attractive reinvestment characteristics
- Long-term sustainable growth
Industries
- Vertical-market software
- Communications infrastructure
- Multi-site healthcare
- Business services
- Tech-enabled and information services
- Value-added distribution
- Many Others
Uses of Capital
- Founder liquidity
- Internal growth initiatives
- Acquisitions and industry consolidation
Situations We Avoid
- Start-ups or early-stage companies
- Turnarounds or deeply distressed situations
Strategy
At Gen3, we employ a systematic approach to our search process, focusing on four key components: people, tools, reporting, and sourcing. We believe that dedicating 90% of our time to targeted proprietary outreach to qualified companies in select industries, and the remaining 10% to opportunistic lead sourcing through intermediaries, constitutes the optimal search strategy. Currently, we are building our deal pipeline to contact business owners as soon as funds have been committed and transferred to Gen3’s bank account. Our target list of companies is being developed using resources such as ReferenceUSA, D&B Hoovers, Axial Networks, PrivCo, and broker networks. Additionally, we are actively connecting with current searchers and successful ETA CEOs who are mentoring us and providing guidance throughout this process.