Colorado is home to more than 653,000 small businesses, making up more than 99% of all businesses in the state. 52% of these small business owners plan to transition their businesses within the next 5 years, and 70% want to sell in the next 10 years. According to the Colorado Office of Economic Development, 80% or more of a small business owner’s wealth is tied up in their business. So when it comes time to retire, small business owners either need to sell the business or liquidate assets. If they liquidate, the jobs and services they provided go away. As the “silver tsunami” of small business sales approaches, it is critical for the Colorado economy to ensure their successful transitions to new ownership.
Studies from the Family Firm Institute and others have shown that 70% of small businesses ownership transitions fail because the right buyer does not have sufficient capital to make the purchase. Lenders are limited by SBA policy to only underwrite a maximum of 90% of a small business acquisition price.

Meanwhile, the bottom 50% of the US population owns only 5% of the wealth in the US. Worker owned business structures such as employee ownership trusts (EOT) are an effective method for increasing community wealth, especially for populations that face generational wealth gaps. 
SmallCapital Business Model

SmallCapital has identified a gap in the small business financing market, which it can solve, unlocking significant returns and exciting impact.

 

• SmallCapital will provide minority equity investments to small buyers ($10M purchase price maximum) in Colorado, focusing on existing, enduringly profitable businesses with a retiring owner

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  SmallCapital generates returns though ongoing, distributable cash, which is returned to LPs and GPs

• By the end of the fund life, SmallCapital’s equity will be transitioned to an employee owned trust (EOT), increasing community wealth and enhancing economic and workforce development

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I am the co-founder and Managing Director of SmallCapital.