The Julip Run Capital Process
1. Talent Identification & Evaluation
We start by identifying if the firm has the right talent for the opportunity or if we can source the required talent if needed. We are flexible with how our management team is structured. We’ve launched businesses where the CEO owns the platform business; we’ve started businesses where we have a CEO and we’ve acquired a business to serve as the operational platform; and we’ve started businesses from scratch and established denovo operations. Depending on the situation, our implementation process, from the initial meeting, through funding and execution make take up to six months depending on numerous factors including among others, the start point and market conditions.
2. Research and Validation
After determining initial interest, which always includes having one of our partners champion the deal, we dig in and initiate an exhaustive research process. We reach out to industry contacts, check references, speak to other investor groups, and vet the opportunity thoroughly. We look at market trends, pricing, gross margin opportunity, profitability, returns on invested equity, cost structures, workforce availability, asset quality, and competition among other things. If we don’t have a CEO, we recruit one and sign them up. With an executive leader, and if our research yields favorable findings, we circulate a position document among our investment committee. With unanimous approval that validates the opportunity, we move forward with implementation.
3. Corporate Formation
Early in the process, once we’ve validated the opportunity, we form a new limited liability company (“LLC”) to serve as the legal entity for the business. We issue all of the common units of the new LLC to the founders (CEO, relevant management team members, and Julip Run Capital) , in various allocations with varying rights, to provide the long term equity incentives for the people who will have the greatest impact on the business long-term.
4. Identity Development
Then we help develop an corporate identity that gives the business life. The identity includes a name, and a logo that conveys to customers and stakeholders an image they can identify. We’ll also work on collateral material that speaks to our value proposition, how we’re different and identifies our products and services.
5. Platform Identification
If the CEO owns the operation and wants to grow the business with us, we ready it for institutional investor market. Or if we need a platform for a CEO we’ve partnered with, we canvas the market reviewing many deals to find the right candidate. We can use brokers or send out solicitations directly. Either way, we enter into a letter of intent to buy the business after an initial due diligence process.
6. Capital Formation
With the platform in hand, we determine the appropriate capital structure. We target 30+% returns for equity investors, and 15-20% returns for junior capital. We craft an Offering Memorandum, detailing the business objective, the operations, the people, the products and services, the competitive landscape, a market description, and we help develop detailed financial projections that lay out our plan. We publish a memorandum of our due diligence findings and we go to market as necessary for all the layers of capital including calls to our limited partners. We then oversee the due diligence process of the institutional players, including banks, respond to diligence requests, and the shepherd the legal process through closing.
Off to races… while the CEO and the management team focus on operations, we manage the corporate development activity and work the business every day. We help management focus on key business metrics, and we continue to manage investor relationships for the life of the business. Obviously, exiting the business to realize a return is paramount. We continuously evaluate the optimal time to exit – our experience is a time horizon of between 3 to 7 years. Our philosophy is that if we focus on maximizing profitability and value to our customers to be the a market leader, an exit will inevitably follow, many times to a group you least expect, for value you never realized at the start!