Many believe that one can only start a successful investment firm when you have a big bag of money, many years of experience at an established private equity firm, gray hair and a big team.

These assumptions didn’t hold me back when I started Arcola 18 months ago. Back then, I believed that my time was now and knew that I would regret not trying more than failing. This story tells my journey, learnings and view on private equity.

How I started my private equity firm at the age of 31.

Getting into private equity has always been my goal and I always wanted to be an entrepreneur. So after gaining experience as an analyst and associate in investment banking and being an associate-director at a leading European private equity firm, I took the calculated risk to start Arcola. What motivated me most was having the opportunity to have a vision and execute on it and have a high impact on businesses.

As an entrepreneur, you soon find out that the highs are much higher and the lows are much lower. So, if you are not fully committed to your vision, you will give up soon. You need to go all in as you cannot start a private equity firm next to your full time job. I gave up on a regular salary, being surrounded by a team of smart investors and the certainty that funding was available for good investments. And no, there was no huge bank account to rely on. 

To minimize my financial risk, I shrank personal financial commitments and became a member at Sweav. This way, I could do on-demand and flexible projects as an independent investment professional if I needed to earn money while pursuing my dream. Even though I never did a project, I still felt like I was part of the community and always had a fall back option.

Key skills to run a successful private equity firm?

A successful investor isn't necessarily defined by years spent in another firm. Of course experience is very valuable, but can be compensated by being open to advice from Arcola-investors, thorough analysis, sticking to pre-set investment criteria, being relentless and hard working. Private equity is taking calculated risks.

Elevate success through people skills

In essence it's all about finding good investments at the right risk-level, executing the business plan in a meticulous way and generating return on investments. People skills are essential as you constantly need to convince the right parties. Even if you get ‘no’ the first time, you might need to try again to persuade the stakeholders you are the better party or have a better plan. 

Gaining people’s trust is key, whether it's a management team to believe and execute a common business plan or a bank to finance the transaction, keeping all stakeholders on board is crucial. 

Additionally, you need an excellent understanding of market and business dynamics to find the right industries to invest in. As an example, Arcola is focused on minimising risks by only investing in no or low cyclicality businesses. Analytical skills are crucial to assess potential investments. Finally, good risk management and assessment skills help you to take balanced risks.

Finally, when you start a firm from scratch, you have to put in a lot of time, creativity, effort and perseverance. Experience teaches that there are pitfalls and set-backs behind every corner. You will be everything: the intern, analyst, researcher, investor, business developer,  administration employee, etc. Additionally, you need to be open to advice, especially from the successful entrepreneurs and investors backing you. This will prevent you having to reinvent the wheel at every turn of the way. 

How to manage closing your first deals as a new private equity firm?

Arcola has its focus on the SME market and follows a deal by deal funding strategy which makes for flexible structures. As a Belgian guy in Amsterdam, I currently focus on the Benelux market and see a lot of matching opportunities across the border for SMEs. By now we have invested in two absolutely stellar businesses, Straatweg Group and Golden Naturals. Both are steadily growing, and both have a business plan to accelerate growth further. 

Most investable SMEs are not only interested in monetising a portion of the shares, but also in attracting investors with vision, business building know-how, and positive intentions towards employees, clients and other stakeholders. 

Private equity is a people business and you need to have a vision on how to grow and where to lead all stakeholders. All investments require sourcing, execution and portfolio company management. After the investment is done, Arcola is actively involved to support the management on a daily basis.

Small size as a strategic advantage

Our small size actually works to our benefit because we can move very fast. To complement, I have a big network and an active pool of people who can help ranging from investors, entrepreneurs to advisors. 

Sweav also proved to offer great support. From being a member, I became a client. Without having the budget to hire top notch talent full time, Sweav allows me to have on demand access to the best business minds in the industry, whether it's a commercial due diligence professional, an interim marketing manager or an operations expert.  

Future of private equity in the SME market

Since SMEs usually have a single service or product there are always market-segments with growth, even when the general economy is depressed. Additionally, SMEs usually have plenty of low hanging fruit in terms of revenue or profitability optimization. Due to these reasons I see much potential for strong investments in the SME market. 

Arcola coins "positive PE" by incorporating ESG values into our investment analysis and decision-making processes. Our active ownership approach is based on a duty of care towards all stakeholders.

Connecting ambition and abundance

Ambitious people generally believe in opportunities and abundance. This is also why I organize regular “Buy Out Borrel”-drinks to connect private equity investors in Amsterdam. Instead of seeing each other as competition, we have a great network opportunity which we can use to our advantage in the future.

Arcola’s next steps are to grow the team and expand the investor base. If you’re wondering, yes we are open to unsolicited applications! Once the Benelux market is fully up and running, Arcola goes multinational by searching for new investments and limited partners across Europe to invest in SMEs all over the continent.