Today’s market is primed for new business ventures to meet the growing demand for solutions to novel issues across all industries. The data backs it up, with over 5.4 million new business applications in 2021, an increase of more than one million in just one year. Prompted by a widespread desire amongst the national workforce for purpose-oriented careers, the great resignation has fueled the next generation of business founders. Although the spread of crowdfunding and other capital aggregators has provided new business owners with the resources to initially launching their businesses, as they garner traction, they often encounter significant roadblocks when it comes to locking in essential growth capital needed to sustain their business models for the long-term.
That is where Meriwether Group Capital’s new Hero Fund comes into play. The groundbreaking initiative was launched by Jamie Shulman and Mike Ferguson, who have nearly 50 years of industry experience between them, to provide much-needed growth capital to lower middle market business entities to empower their leaders to grow and scale their organizations. The fund offers innovative debt solutions to democratize access to growth capital for entrepreneurs seeking to capitalize on key market opportunities and achieve their full potential—all while retaining equity and control over their organizations.
The newly formed Meriwether Group Capital operates in partnership with the established entity Meriwether Group, a 20-year Portland firm that has garnered a reputation for outstanding accelerator and advisory services and has supported well-known local companies like Voodoo Doughnut, Dave’s Killer Bread, Stumptown Coffee, Alpenrose Dairy, and many other successful PNW brands. Through the Hero Fund, Shulman and Ferguson hope to continue stimulating the growth of the local economy and eventually expand entrepreneurs’ access to capital beyond the region. “The opportunity to help businesses scale, hire more people, and build community while, at the same time, providing meaningful market returns to our investors, makes the Hero Fund an important offering,” notesShulman.
Originate Report recently had the pleasure of sitting down with this dynamic duo to get an insider’s perspective on the motivation behind launching the Hero Fund and what they hope to accomplish with their latest venture.
No-Strings Attached Growth Capital
Small to mid-sized business (SMB) owners pour their heart and souls into their organizations. That sacrifice is not lost on Meriwether Capital Group. “These business owners essentially have two ways to access capital: equity or debt,” Ferguson explains. “Forfeiting equity is the most expensive approach to raising capital as it is dilutive to ownership. The Hero Fund offers a non-dilutive and efficient alternative debt solution that allows borrowers to maintain ownership of their businesses while accessing the capital they need.”
The Hero Fund supplies capital needs outside the criteria of traditional lending organizations. Shulman and Ferguson identified a sizeable funding gap in the marketplace spanning across a diverse collection of major industries. Emergent business entities in these sectors are commonly unable to obtain entrepreneurial debt from value-added lenders that is necessary for them to grow. “I have seen countless companies walk out the door with a need and a strong business case for borrowing alongside a clear path to satisfying the debt that are just outside traditional banks’ mandate for lending,” observes Shulman. “We know there is an underserved niche with demand for the lending we offer, along with a great deal of investor interest. At a time when entrepreneurship is more accessible than ever before, we want to be able to fill a need, help foster small businesses, and be an economic drive for the Pacific Northwest and beyond.”
The fund invests in lower middle market businesses, primarily located in—but not limited to—the Pacific Northwest region that have annual median revenues ranging from $2 million and $75 million, EBITDA of at least $250,000, and borrowing requirements between $500,000 and $5 million. Borrowers use the capital for a wide variety of uses, such as supporting organic growth, funding acquisitions or management buyouts, making capital investments, and refinancing additional outstanding debts or bridging working capital gaps while raising equity. “They can essentially take the capital we provide them and convert it into a much higher level of gross revenue—hire more people or add investments to their facilities,” notes Schulman.
Beyond Financials: A Philosophical Approach to Underwriting
Every lender has a unique underwriting methodology. Traditional banks focus almost exclusively on quantitative metrics, premising their decision primarily on cash flow, financials, and credit history. The two believe a more balanced approach—one that factors in both quantitative and qualitative data—is the most effective approach regardless of the current state of the economy. “Even during periods of economic recession, we have the resources and experience to fill the gap left by banks,” explains Ferguson. “If it is a good loan, we will make it happen. We take a wholistic view of potential borrowers by getting to know the management team. We invest a lot in character—there is more to successful businesses than just the numbers.”
This relationship-based approach to vetting borrowers is indicative of Meriwether Group Capital’s overarching mission: to support the true heroes of the economy—the innovators and creators who are actively working to address emergent market needs. The pair adopts a similar approach when choosing investors for the Hero Fund. “We want to develop mutually beneficial relationships with our investor base and grow at a pace to fully deploy their funds and optimize returns,” says Shulman. “The majority of our investors have a strong desire to support the small businesses in their local communities where they live—helping to sustain and invigorate the local economy.”
