Check out our frequently asked questions to learn more about Evolution Capital Partners and its small-business growth strategy.
How long has Evolution been in business?Evolution was founded on September 30, 2005.
Where does Evolution invest?Evolution invests in companies that are headquartered in the continental United States and Canada. However, our partner companies will often have international offices and market their products to a worldwide audience.
What is a committed Fund?Generally speaking, a committed fund is a specific amount of liquid capital that has been raised, secured and is now available for immediate investment. Investors in committed funds have left the decision to make particular investments up to the fund's investment committee and are contractually obligated to fund investments at their request.
Is Evolution a committed Fund?Yes. Evolution has been purposefully structured as a committed fund, because it allows us to focus on identifying and underwriting investment opportunities with top-shelf growth companies and not be distracted by fundraising efforts. In addition, this approach also provides the seller with a guarantee that the capital will be immediately available once the deal is finalized.
In what types of firms or industries does Evolution invest?Evolution searches a variety of industries for companies generating at least $1,000,000 of EBITDA. In our experience, these companies are run by small-business owners who are committed to transforming their businesses by adopting the Five Fundamentals methodology, with the goal of realizing double-digit revenue growth with accelerating profitability.
In what size firm does Evolution typically invest?The businesses that Evolution has historically invested in generally produce at least $5 million in revenue, have between 10 and 40 employees, and generate at least $1,000,000 of EBITDA.
In which types of firms or industries will Evolution NOT invest?Evolution has historically avoided investing in natural resource exploration, oil and gas exploration, real estate, startups, and any other highly cyclical or capital-intensive businesses.
Do you invest in startups or large firms?No, and no. Our core competency is helping small businesses navigate the difficult transition from entrepreneurship to a professionally managed organization through implementation of our Five Fundamentals methodology. By achieving a thorough and immersive understanding of the brand, business and culture of our partner companies, we are able to consistently deliver a mutually beneficial outcome for both short- and long-term wealth creation.
How much capital does Evolution typically invest in a firm?Evolution typically invests between $2 million and $10 million.
How does Evolution add value to a small business?Evolution adds value by providing not only financial capital, but also the intellectual, emotional, relational and strategic capital required to equip emerging companies as they accelerate through the growth curve. Because Evolution partners have all been entrepreneurs or small-business owners themselves, they are able to offer that invaluable “been there, done that” advice on how to best scale their companies – from key hires and business reporting practices, to the right software and infrastructure combinations – and provide high-level introductions to key clients critical to business growth. In addition, Evolution purposely structures the investment transaction conservatively, with little to no debt and cash on the balance sheet, in order to strategically position the company for optimal present and future growth.
How long does Evolution typically remain invested in a firm?Evolution does not go into an investment with a particular timeframe in mind. However, it has historically remained invested for an average of 3-7 years.
What is a control investor?In general, a control investor is a group that invests capital and, in return, expects to be involved in major decision-making for the company, including executive personnel, strategic direction and the eventual sale of the business.
Is Evolution a control investor? If so, do they take a controlling interest in every firm in which they invest?Yes. Evolution is a control investor that takes a controlling interest in every firm. However, our investment philosophy is to maintain, enhance and support the existing management team. In our model, the business owner is the NASCAR driver and Evolution is the pit crew. The owner is still in the driver’s seat – because they know the business better than anyone – but Evolution is there on the headset sharing real-time intelligence about traffic, conditions and drafting partners and determining when it’s time to come in for a pit stop to get new tires and fuel up before getting back in the race. When our partner companies win, we win—ultimately creating wealth for both parties. At the end of the day, we recognize that the corporate vision is born from the founder and, therefore, its success will ultimately hinge upon the founder’s commitment to the Five Fundamentals methodology and achievement of business objectives.
Will Evolution take over and run my company?No. Just like in our NASCAR analogy above, Evolution works as a partner to provide a set of tools, processes, best practices and human resources that equip management to start working on their business, instead of in their business, to drive long-term value.
Will I receive any immediate capital?Yes. Evolution typically pays current owners 50-80% of the current value of the firm in cash when the transaction closes. It also eliminates many financial and contingent obligations, such as personal guarantees to banks. Generally speaking, the more an owner invests in the future of their business, the more we like it.
Will I get any future upside to partnering with Evolution?Yes. Evolution structures its investments so that business owners are positioned for two discreet “wins.” The first is 50-80% of the current value of the firm, paid immediately in cash. The second is an even larger payday that can be realized a few years down the road if the firm executes on the mutually agreed upon growth plan and is then sold for a significantly larger sum. In this situation, the value of the owners’ investment in the new business is worth more than the value of the entire original business prior to partnering with Evolution.
Will I still be a private company?Yes. Evolution invests exclusively in private companies, and an investment by Evolution will not change the private-company status of your firm.
Can I immediately retire after an investment from Evolution?Typically, no. Our investment style involves investing in growing companies wherein the existing management commits to partnering with Evolution as we invest in the future of their firm. We are open, however, to working on a 1-2-year transition plan, provided an industry expert can be identified before the deal closes.
If Evolution invests in my firm, would I become an employees of Evolution?No. You would remain an employee of your company.
How is Evolution’s investment typically structured?Evolution rarely uses bank debt, and typically ensures there is sizable cash in the bank at close.
What will Evolution do with my outstanding debt?All outstanding debt will be paid off at close.
Will I still own stock in my company?Yes. Evolution believes the best years of all investments are yet to come, and we want to ensure that everyone shares in the financial benefits and upside of future growth.
How much time does it usually take for Evolution to invest in my firm? What is the process?Having done this for many years, we know what we’re looking for. We will be able to very quickly say whether it makes sense to continue working through our process, and we are happy to share tools that will allow you to determine if Evolution is a good fit for you. In short, we request that business owners provide three years of historical financials, answer a 10-question evaluation form and provide at least a 5-year strategic plan summary outlining the owner’s vision for the business. Upon receipt and after some discussion with the business owner, Evolution will provide a non-binding indication of interest on what we believe the value of the business is today and high-level deal structure comments in easy-to-understand language.
Timing from the first phone call to this point is generally determined by how prepared the business owner is to provide Evolution with the necessary information. Typically, it can take anywhere from 3-6 weeks. The non-binding indication of interest is essentially designed to see if Evolution and the business owner are on the same page with regard to valuation of the business and goals for the relationship. If there is a match, Evolution and the business owner will then sign the indication of interest, which only binds both parties to confidentiality and exclusivity to work in good faith with each other to complete a transaction within a pre-determined period of time—typically within 90 days or less.
Are there any “deal killers” that will cause Evolution not to invest in a firm?Evolution leadership holds in high regard the value of our personal and professional integrity, and we hold our potential future partners to this same high standard of excellence. Aside from that, the criteria previously mentioned and an obvious desire to learn new business practices, there are no carte blanche “deal killers.” Like any relationship, our process will involve getting to know each other and, therefore, a certain degree of “chemistry” and positive personal dynamics will need to accompany the desirable product mix, market position, growth opportunities and strong balance sheet to ensure a good fit.
What is the background of Evolution’s partners?The Evolution partners all have experience working in both small businesses and significantly larger organizations. They take the best practices learned at these larger businesses and employ them in the Five Fundamentals methodology to drive the initial phase of value creation at the company. The benefit of the Evolution partnership is that each partner works together in a collaborative effort to ensure specialized skill sets are put to their best use with each of our partner companies.
Who are Evolution’s advisors, and how will they help me?Evolution understands that business owners need high-level introductions to key clients, industry experts and joint venture partners to take their firm to the next level. Evolution has access to both domain experts and C-suite executives across many industries and verticals, and we leverage this advisor network to open new doors and make the warm introductions necessary to help propel our partner companies to new heights. When combined with our Five Fundamentals methodology for profitable growth, world-class advisory team and vast inventory of organizational resources, we mitigate risk and maximize performance—making success that much easier.
Can’t a loan from my bank accomplish the same thing Evolution is offering, without the hassle?Banks have attempted to manage risk by implementing stringent criteria, strict metrics and rigid ratios for capital consideration, versus trying to truly understand each business on a deeper level and investing in long-term relationships with the owners. Bank contract terms will often require the assumption of a secured personal guarantee against your property and estate, a large discount on asset values and a very small margin of error in the event of unforeseen circumstances. Additionally, the rapid repayment of loans required by banks does not keep money in the business long enough to support initiatives that will create long-term wealth for the owner.
Evolution believes that thinking of capital as simply dollars is not enough. You need intellectual, emotional, relationship and strategic capital. You need advice on how to best scale your company—from key hires and enterprise technology solutions, to HR procedures and insurance policies. You need high-level introductions to key clients that can take your business to the next level, expertise in selecting the right software, hardware and infrastructure combinations, and the branding and marketing strategy required to reach target audiences. And, finally, you need someone you can trust who will tell it to you straight, be it the need to shut down an underperforming product/division, reorganize along business lines or provide management support to make tough personnel decisions. In short, you need a partner who can amplify your upside growth while minimizing your downside risk—by applying proven, scalable strategies to ensure you get it right the first time.
Is an Evolution investment better, or worse, than a bank loan for funding growth?At Evolution, “partner” means just one thing—everything. For us, “partner” means we’re all in. Your success is our success, and your challenges are our challenges. We come alongside, hitch ourselves to your wagon and start pulling. Within the first week, your load will already feel lighter, as we provide the support, systems and expertise to help carry out of those tasks you shouldered alone. Our Five Fundamentals methodology will help you master that one elusive task that frustrates business owners the most—profitable growth.
Evolution understands the mind of the entrepreneur, but more importantly we understand their heart. You decided to start your own business because you were tired of being told what to do, you wanted to build something of lasting value and, most importantly, you wanted the opportunity to control your own destiny. So, now you’ve built your company and finally have that control you wanted—or do you? Sure, you own the shares and legal paper, but are you really in control? Could you retire today, liquidate your position and get a payout to enjoy the rest of your life? Could you take a year off to just relax? Do you have a legacy that could be handed down to your kids and grandkids? If not, you have to ask the question—do you control your company, or does your company control you?
At Evolution, our mission is to partner with owners of successful, established companies like yours, dramatically accelerate your revenue growth within a short period of time, and then put you back in control of what really matters—your life. Our influx of cash, intellectual capital, professional networks, industry best practices, brand and marketing optimization, and advanced reporting and infrastructure systems enable firms to rapidly scale both top-line revenue and bottom-line profitability. To achieve this, Evolution takes a controlling interest in the company and becomes a catalyst for driving this growth in partnership with the owner and existing leadership team. So, here’s the 800-pound gorilla trade-off you need to ask yourself—can Evolution help my business reach my professional and personal goals faster than if I continue to go it alone?