In this fireside chat, Brett Hickey, Founder & CEO of Star Mountain Capital, shared his insights on creating a niche in private credit investing. With over 20 years of experience in the industry, Hickey discussed the unique aspects of Star Mountain Capital’s business strategy, investment approaches, and the opportunities and challenges in the lower middle market.

Key Takeaways:

Specialization is Key: Star Mountain Capital focuses on the US lower middle market, bringing large market resources and capabilities to this underserved segment.

Value-Added Direct Lending: Hickey’s firm offers a value-added direct lending strategy, providing more than just capital to business owners, but also resources and expertise to help them grow.

Alignment of Interests: The company’s culture prioritizes alignment of interests, with 100% of the senior investment team having personal capital invested alongside investors.

Growth Opportunities: The lower middle market presents a significant growth opportunity, driven by demographic trends, with an estimated 65 million Americans over 65 years old, creating a motivation to sell businesses.

Platform Deals vs. Buy-and-Build: Hickey sees more growth in buy-and-build opportunities, allowing companies to acquire smaller competitors at lower valuations and exit at higher multiples.

Independent Focus: Star Mountain Capital’s independent focus allows for specialization and alpha generation, complementing larger asset managers.

Secondary Market Opportunities: The firm’s secondary business provides additional data, insights, and resources, enabling more informed investment decisions.

Key timestamps:

00:09: Introduction to ION Influencers’ Fireside Chats
00:35: Background and Early Career
01:12: Experience at Citigroup
02:17: Uniqueness of Star Mountain Capital
03:24: Size of the Fund and Investor Base
03:56: Primary Investment Strategies
04:55: Origination of Direct Lending Transactions
06:15: Value-Added Direct Lending Approach
07:00: Collaborative Ecosystem and Alignment of Interest
07:33: Economic Alignment and Differentiated Value
08:24: Generational Opportunity and Aging Demographic
09:19: Role in Acquisitions and Business Integration
09:45: Growth in Sponsor and Non-Sponsored Market
10:59: Buy and Build Strategy
12:18: Advantage of Independent, Focused Player
13:08: Comparison with Large Asset Managers
14:56: Business Model and Long-Term Viability
17:47: Expectations as the Firm Grows
19:11: Focus on Secondaries
20:09: Focus and Investment Strategy
20:59: Competition and Investment Opportunities
21:51: Closing Remarks