Dartmouth College student
St. Cloud Intern Reflection, December 2019
Hello! My name is Yilin, and I was an intern at St. Cloud Capital, LLC during winter break. I am currently a sophomore at Dartmouth College.
I was nervous on the first day of the internship and did not know what to expect. However, the St. Cloud team members welcomed me, and I quickly adapted into the internship life. Chief Financial Officer and Chief Compliance Officer James Hays and Executive Assistant Tami Brinson were available anytime for questions and ensured that the internship went smoothly. Tami was very helpful and provided the interns with everything we needed. Part of my responsibility as an intern was to assist Tami with her duties. I helped operate the security camera, welcomed guests, and answered phone calls.
Even though I was an intern, I felt fully integrated into the team. For example, I sat in many of St. Cloud’s client meetings and Monday-morning team meetings. From these experiences, I was able to see how a well-oiled investment team functions in the private equity and direct lending world. The knowledge I gained from the St. Cloud team and the CEOs of various companies was incredible.
I assisted St. Cloud Vice Presidents Matt Smith, Brian Chow, and Sibyl Kavak in the initial screening process of new deals. I reviewed company presentations and performed supplemental research, using a variety of resources that private investment firms such as St. Cloud can access. Additional day-to-day activities included participating in meetings with sponsors and investment bankers, followed by regular debriefs with Matt, Brian, and Sibyl. The debriefs provided me with the opportunity to express any doubts, questions, or opinions about the meetings. Through our discussions, I gained an understanding of how an experienced investor looks at a company and analyzes competitive advantages, weaknesses, and financial prospects. During this internship, I not only gained technical knowledge by utilizing mini-financial-exercises and examining pitchbooks, but I also absorbed a new way of analyzing companies.
Overall, the internship at St. Cloud provided me with many high-quality experiences in the direct lending and private equity industry. I would like to express a large Thank You to Managing Partners Ben Hom, Kacy Rozelle, and Robert Lautz for allowing me to intern with St. Cloud, this experience was invaluable.
For many service members, the transition from active military service to the civilian sector is extremely daunting and stressful. As an active U.S. Army Officer, I can attest to this and have found my transition period to be a moment to moment battle. However, since I began interning for St. Cloud Capital my path has become clearer and I feel ready to take on the many future challenges that await me. Prior to joining the team at St. Cloud, I served five years in the U.S. Army of which four were spent at The National Training Center in Fort Irwin, California. There I led combat soldiers in all manners of armored and reconnaissance warfare, assisted and advised two Commanding General Officers as an aide-de-camp, and coordinated public relations for the post directed towards General Officers, Congressmen, Foreign Dignitaries, and other distinguished visitors. Needless to say, debt and equity financing were not a part of my professional experience prior to this internship. Despite this and joining the team amidst the beginning of the COVID-19 crisis in the United States, St. Cloud never hesitated to utilize me throughout all stages of the private credit underwriting process. These activities included deal sourcing, industry research, due diligence analysis, transaction structuring, underwriting, and investment memo writing. St. Cloud is a flat and transparent firm that goes all in for its interns. Consequently, my experiences with the firm have undoubtedly prepared me to excel at my transition into a career in finance.
Primarily, I assisted the vice presidents with the stages I outlined earlier and I will highlight two transactions that I allocated the majority of my time towards. The first being an M&A deal within the healthcare industry. While the transaction is ongoing, I learned more than I ever thought possible regarding healthcare business models, healthcare public policy, public equity markets, and deal processing. Working alongside Brian Chow throughout the due diligence process provided constant discussion, learning opportunities, and mentorship which has proven to be invaluable. This deal will serve as the cornerstone for future interview conversations once the recruiting season begins. The second was the opportunity to advise and coordinate with a CEO of a portfolio company which resulted in the creation of a new business vertical within the Department of the Army currently under development. I was tasked by Kacy Rozelle, one of the partners, to match my prior experience and personal network with the portfolio company to help create a new line of business for it. Under fellow Army Veteran Matt Smith’s supervision, I learned how to independently develop a relationship with a client, identify and analyze their needs, and custom tailor a solution. This experience gave me a glimpse into the more senior skill set of finance professionals that goes beyond the quantitative and one that will be necessary for building a successful long-term career. In addition to these two deals, I was exposed to more than two dozen other transactions that varied widely by industry, business model, leadership team composition, and deal terms. Each provided its own set of lessons learned and discussions with every member of the firm.
I am the first Veteran to intern for St. Cloud Capital and I suspect that I will not be the last. My deal experiences accented by the mentorship, one-on-one learning, and autonomy makes this an ideal opportunity for Veterans to assimilate into the civilian sector. This internship has single handedly positioned me for limitless future opportunities within the finance industry. Beginning this fall, I will be matriculating into Boston College’s Carroll Graduate School of Management where I will be a candidate for a Master of Business Administration and Master of Science in Finance. In addition to beginning my graduate degree programs, I am actively seeking a summer 2021 internship with investment banks, private equity firms, and hedge funds. I want to thank the entire St. Cloud team and extend a special thank you to Ben Hom for the offer to intern and being an incredibly gracious mentor.
Captain Christopher Collar, U.S. Army Armor Officer
St. Cloud Capital, LLC, a lower middle market growth capital lending firm, announced today that it will be participating in the Diversity Internship Program along with six other Small Business Investment Company (SBIC) managers in the Los Angeles area in Summer 2020. The main goal of the Small Business Investing Scholars program is to create inclusive enterprises by promoting gender, racial and ethnic diversity in the private equity and direct lending industries. This program is highly supported by Senator Ben Cardin of Maryland, a Ranking Member of the Senate Committee on Small Business and Entrepreneurship. Brian Chow and Sibyl Kavak, both Vice Presidents at St. Cloud, will be heading up this program as representatives from the firm.
The selected intern(s) will be guided by a mentor from St. Cloud and will meet regularly with other members of the firm. According to Mr. Chow, “Interns gain a lot of hands on experience through projects such as deal sourcing, doing market research and due diligence and conducting analysis on portfolio companies.” Ms. Kavak added, “The intern(s) will be heavily involved in the day-to-day business of St. Cloud and be able to contribute to St. Cloud’s culture.”
While St. Cloud has been running its own successful internship program for the past 18 years, drawing students from local universities such as UCLA and USC and from universities across the country including Dartmouth, UT-Austin, Brown, Penn, Columbia, Wisconsin and Purdue, the firm sees the Diversity Internship Program as an opportunity to support diversity in the industry. Ever since St. Cloud Managing Partners Benjamin Hom and Kacy Rozelle’s introduction to the program at the Small Business Investors Alliance Conference in October 2019, they have been excited to participate in this new opportunity. Since St. Cloud deals with a wide range of industries, it also believes that having a diverse team will increase firm opportunities.
Mr. Hom said, “As a minority myself, I know it could be hard sometimes to find internships and navigate through interview processes. I try to help and guide college students navigating through internships and future careers as much as I can. I think this program will be a great addition to such effort and bring students who can bring diverse perspectives to St. Cloud.” Mr. Hom also recently attended a Wells Fargo SBIC conference where industry professionals spoke on best practices for finding, hiring and managing diverse talent.
St. Cloud believes that diverse teams generate higher returns and contribute to a more interesting company culture. “Diversity in all forms — ethnicity, nationality, gender, professional backgrounds and experience — enhances efficiency in private equity,” according to Financial Times. In order to create more diverse environments, firms should provide more role models to young professionals. Job postings for diversity positions increased 30% in 2019. St. Cloud is excited to join other professional organizations, like the Office of the Comptroller of the Currency, in providing diversity internships.
Managing Partner, Kacy Rozelle, Attends Small Business Administration Conference
December 12th, 2019
On December 11th, 2019, Kacy Rozelle, Managing Partner at St. Cloud Capital, LLC, attended the Investing in Nevada Working with SBA Small Business Investment Companies (SBICs) conference in Las Vegas, NV. This conference was hosted by the Nevada Office of the U.S. Small Business Administration (SBA). The SBA holds SBIC program workshops to educate prospective SBIC applicants and investors on opportunities to form an SBIC or invest in SBICs who, in turn, provide capital to U.S. small businesses. The workshop featured an interactive discussion with representatives from SBA’s Office of Investment and Innovation regarding the SBIC program, SBIC managers, bank, family and institutional investors, federal regulators, and small businesses receiving SBIC capital. The conference offered new insights and exceptional networking opportunities for Mr. Rozelle on behalf of St. Cloud Capital.
Mr. Rozelle was invited to participate in the program by Joseph Amato, the Director of the Nevada District of the Office of the U.S. Small Business Administration. Mr. Rozelle joined a panel discussion alongside Mr. Amato and his colleagues: Joe Shepard, the SBA’s Associate Administrator, and Sam Boyd, the SBA’s Chief Investment Officer and Director of Program Development. Mr. Rozelle spoke about the benefits of the SBIC program and noted that “managing a fund and providing growth capital to the nation’s small businesses has great benefits.” According to Mr. Rozelle, licensing requirements were discussed including the application process, the diligence performed by the SBA, prerequisite investment management experience, legal documentation by fund counsel, fundraising, and capital deployment once licensed. Limited partners in attendance, including representatives of Wells Fargo Bank and the Bank of Nevada, also offered insights from their perspectives.
SBIC funds offer incentives to both the limited partners (LPs) and the small business owners in the United States. “In 2010 alone, SBICs facilitated the investment of $2.05 billion in small businesses, helping grow our economy and create jobs,” says U.S. Senator Bob Casey, of Pennsylvania. SBICs invest in small businesses that range in size from $1 million to $100 million in annual revenues. In the 2018 SBA report, SBIC invested $5.5 billion in 1,151 small businesses and created and sustained an estimated 106,021 jobs. The U.S. Department of the Treasury reports that SBIC investments are attractive to LPs, especially banks, since they “generate favorable financial returns, develop their small-business portfolios, and potentially earn Community Reinvestment Act (CRA) consideration.” In addition, the rigorous SBIC licensing process, which can take 12 to 26 months, provides credibility to the funds.
For Mr. Rozelle, “the SBA’s presentation inspired a free-flowing conversation, and a lot of useful information was provided to all in attendance.” In addition, “the conference was opportunistic in that there are currently no licensed SBICs that are based in the State of Nevada, and St. Cloud was able to offer insights and experiences based on our 18 years in the SBIC program across two licensed funds,” said Mr. Rozelle. St. Cloud is in the early stages of planning its next investment fund, which the company expects to take through the SBIC licensing process.
CFO, Mr. James Hays Attends the LPGP CFO/COO Private Debt Conference
December 10th, 2019
Mr. James Hays, Chief Financial Officer and Chief Compliance Officer at St. Cloud Capital, attends conferences nationwide to keep updated on the direct lending industry. On October 23rd, 2019, Mr. Hays attended the LPGP CFO/COO Private Debt Conference in Chicago, IL. LPGP Connect explores the complex roles of CFOs and COOs in managing private debt funds. The objective of the conference was to look closely at how investment groups can adapt to the ever-challenging needs of the marketplace and excel in delivering operational excellence. From talks about benchmarking funds’ performance to technological advancement and its impact on day-to-day back-office operations at private equity firms, Mr. Hays participated in active conversations with likeminded C-suite executives from the industry.
When asked about his motivation to attend this conference, Mr. Hays noted “I felt this was an important way to stay ahead of the curve while networking with like-minded colleagues in the industry.” He added that “The CFO/COO Private Debt conference is a great gathering, providing high-level updates regarding the industry, current and upcoming regulations, and best practices. I was able to take away some valuable insights that I hope to build into St. Cloud’s operations.” Kacy Rozelle, a Managing Partner at St. Cloud, pointed out that “having James participate with others in similar roles at a variety of direct lending firms should help us to maintain best-in-class financial controls, processes and LP reporting.”
Mr. Hays found discussions about the Private Debt Funds: Reports, Disclosures and KPIs, and the CFO/COO Panel: How to Run a Private Debt Fund to be most beneficial in his role as a CFO. Mr. Hays compared what St. Cloud discloses, reports and uses as Key Performance Indicators (KPIs) to other private equity and direct lending firms. KPIs are important metrics used in financial industry to measure the success of the investment. According to Timothy Spangler, in his Forbes article, “the key concept in measuring performance in private equity funds is the internal rate of return which is the net return earned by investors over a particular period, calculated on the basis of cash flows to and from investors, after the deduction of all fees, including carried interest.” In addition, Mr. Hays attended conference sessions to see if there are any procedures or operational guidelines other financial institutions utilize that would be beneficial for St. Cloud to adopt.
Supports Senior Roles for Women through Vice President, Sibyl Kavak
December 16th, 2019
St. Cloud Capital’s Vice President Ms. Sibyl Kavak, represents the firm at conferences nationwide. On September 23, 2019, Ms. Kavak attended both the Kayo Women’s Credit Forum and the Kayo Women’s Private Equity 2019 Summit in Boston, MA. Kayo believes that women should have a community that supports, elevates, and champions them. Attendance at the conference is a testament to this belief. Ms. Kavak notes that there were approximately 500 women in attendance on both days, and “the largest women’s conference she has been to.” This year’s talk ranged from the Evolution of Female Founders in Credit to Next Generation of Female Leaders in Private Equity. Ms. Kavak had a chance to network and build long-lasting relationships with like-minded women in private equity and direct lending industry through this conference.
Ms. Kavak found both days to be useful and filled with great content. According to Ms, Kavak, the first day had a wide range of topics from private debt as an asset class and different financing options in today’s competitive landscape. As Ms. Kavak states, “The panel entitled Evolution of Female Founders in Credit provided female founders a platform to speak about their challenges raising their first funds.” She added, “this is particularly inspiring since women still make up such a small slice of leadership roles in the industry. The private equity day had considerable valuable content as well including different industry discussions ranging from consumer-packaged goods to biotech. There were also great discussions on post-merger integration and the difficulties around combining process, technologies, and cultures successfully and cost-effectively.”
In addition to expert panels, Ms. Kavak noted that “both days also provided for a lot of great networking opportunities and meaningful discussions with women in the financial industry.” According to a New York Times article, “Roughly less than 20 percent of financial advisers are women, a number that has barely budged for the past two decades despite rising gender equity in other fields.” However, according to the NYT “a study by the Warwick Business School concluded that women outperformed men at investing by 1.8 percent.” The Economist article adds that “[this outperformance is because] women are more risk-aware.” In fact, according to the Boston Consulting Group, “between 2010 and 2015 private wealth held by women grew from $34trn to $51trn. By 2020 they are expected to hold $72trn, 32% of the total.” This means that “investment firms focusing on wealthy women are springing up, such as Ellevest (motto: “Invest Like a Woman”). Other money managers are seeking to hire female advisers and setting up dedicated teams for female clients.”
Ms. Kavak is excited to be in this everchanging industry with other female professionals and to apply new industry insights she learned at the conference into her daily routine. St. Cloud Capital’s Managing Partner, Kacy Rozelle, adds “we were excited to finally be able to access the valuable Kayo programs and hope Sibyl continues to attend annually.”
On October 6th, 2019, St. Cloud Capital, LLC Managing Partners Benjamin Hom and Kacy Rozelle went down to Palm Beach, Florida for the annual National Summit for Middle Market Funds (National Summit). This annual conference is hosted by the Small Business Investors Alliance (SBIA). St. Cloud participates in this conference as each year’s summit “offers a unique environment to connect with 400+ fund managers, limited partners, investment bankers and select service providers over the course of three days. The National Summit program offers participants engaging speakers, exceptional networking, and essential content, all in an attractive setting.” Hom and Rozelle heard from speakers like Greg Williams, Editor-in-Chief at WIRED, about the impact of A.I. on businesses.
Why attend the National Summit? Mr. Rozelle says, “Every year, I look forward to Brett Palmer’s ‘Legislative and Regulatory Review’ of the U.S. Small Business Administration’s Small Business Investment Company (SBIC) program. Mr. Palmer is president of the SBIA and his up-to-the-minute status review of the challenges and opportunities facing the broader private equity industry as well as the SBIC program is always insightful and revealing.” Mr. Rozelle added, “At St. Cloud, we are always interested in how the SBIA is working to advocate for appropriate regulation and smart tax policy to promote investment and the growth of small businesses.”
St. Cloud keeps up to date with industry news, such as U.S. Small Business Administration “modifying its method for calculating average annual receipts used to prescribe size standards for small businesses,” which will go into effect January 6, 2020. This would expand the pool of small businesses as the government will give more contracts to small businesses. In addition, “private equity-backed acquisition values, measured as a multiple of cash flow, have exceeded valuations in global stock markets,” according to Forbes and Bain & Company, creating an opportunity for higher profits and returns.
Furthermore, St. Cloud values the National Summit and is a regular participant because the National Summit offers many resources for its attending firms. Several years ago, the SBIA initiated the CapitaLinx program within the National Summit. This program consists of a series of pre-scheduled introductory or follow-up meetings between general partners and limited partners. St. Cloud is able to capitalize on this networking and fundraising opportunity. For example, several of St. Cloud’s current limited partners were first introduced through this CapitaLinx program. In addition, Mr. Hom points out, “The National Summit is a ‘never-to-miss’ event for St. Cloud because we attend networking events with other SBICs and get to spend time with our service providers and fund counsels.”
St. Cloud has a deep involvement with the SBIA. Both Kacy Rozelle and Benjamin Hom have served as Western Region Presidents and on its National Board of Governors. Mr. Rozelle and Mr. Hom have also both chaired the annual Western Region Conference over different years. In these roles, the gentlemen contributed their extensive private equity and direct lending experience to advance the mission of SBIA.
December 10, 2019
In early September, 2019, St. Cloud Capital, LLC onboarded Vice President Sibyl Kavak onto its investment team. “We’ve followed Sibyl’s career trajectory for a number of years and are excited to have her join St. Cloud,” stated Benjamin Hom, Managing Partner of St. Cloud. “We were excited to be able to convince Sibyl to join the St. Cloud team as our first woman investment professional. It was long overdue and she has already hit the ground running. We hope she will be a regular contributor and participant at the LPGP Women in Private Debt Conferences”, said Kacy Rozelle, Managing Partner of St. Cloud.
Women in business, such as Ms. Kavak, are increasing their presence in the private equity and direct lending world. Additionally, women today own or co-own 35% of franchises and 42% of all businesses, according to the Wall Street Journal. Industries with the most female business owners include interior-decorating, clothing/toys and accessories and travel agencies. “I think it’s driven by the fact we have more women in C-level upper-management positions than ever before, and when those women leave corporate America, they have more confidence to run their own business,” says Jania Bailey, CEO of FranNet. Nevertheless, diversity is still an issue in the financial industry and within Wall Street, according to Wall Street Journal. However, more and more clients are asking to work with female financial advisors. St. Cloud is also seeing increasing amounts of female business owners looking for funding to grow their businesses.
Sibyl is already a big part of St. Cloud and represents the firm at conferences nationwide. On October 30th, 2019, Sibyl attended the LPGP Women in Private Debt Conference in Miami. The conference brought together professional women to discuss trends in the private credit market as well as explore opportunities and challenges affecting women in the financial industry. “This conference provided a lot of great content and excellent networking. It is always great to meet and develop connections with other like-minded and inspiring women,” stated Sibyl. “It is also very encouraging to see increasing amounts of female founders and entrepreneurs looking to finance growth in their businesses. I am excited for the partnership opportunities to come.”
Sibyl appeared on a panel with Jeri Harman of Avante Capital Partners and Jessica Nels of Churchill Capital. The panel, “Strategies, Products, Risks and Returns” centered around the discussion of sponsored versus non-sponsored lending as well as opportunities in the lower middle market. St. Cloud prefers non-sponsored lending as its focus is to invest in entrepreneur-owned, family-run and other private companies that are seeking capital to meet a particular growth opportunity. “While there is certainly more handholding and typically no “deep pockets” behind us, we seek to partner with strong management teams who have spent a good portion of their lives living and breathing their businesses, and we seek to have their incentives completely aligned with ours,” noted Kacy Rozelle.