“We want to work with people who are very experienced. PEF had a depth of knowledge across venture debt as well as mezzanine debt.”
Renée Baker, Founding Partner, Pivotal Capital

Client Background

Founded in 2013, Pivotal Capital provides venture debt financing for growth capital, equipment purchasing, and acquisitions to U.S. venture-backed companies in emerging technology, life sciences, and sustainable energy sectors. Leveraging extensive experience in venture debt and a uniquely entrepreneurial approach, Pivotal works with its portfolio companies one on one to give them the benefit of the firm’s knowledge, experience, and insight.

Situation

After collaboratively launching a specialty finance structure several years earlier, Founding Partners Renée Baker and Tom Niehaus decided to “go back to basics” in 2012 and market a new fund with a General Partner / Limited Partner structure and a focus on venture-backed companies.

Along the way, they realized that becoming a Small Business Investment Company (SBIC) aligned strategically with their focus on startups, job creation, and generating income and revenue for their Limited Partners. It would also enable them to follow best practices for administering and reporting on the fund.

The advantages were significant, but the SBIC structure meant that Pivotal needed to manage a complex and time-consuming fund administration layer.

“We work with start-up companies, so we understand the importance of efficiency,” said Baker, Founding Partner, Pivotal Capital. “Our objective was to keep the head count and overhead down and spend more time with our portfolio so that we could understand the intricacies and stay proactive.”

The PEF Services Solution

As Baker and her partner got closer to launching their firm in 2013, they decided that PEF’s fund administration experience and SBIC expertise made them the perfect service partner.

“Whether it’s a law firm or an accounting firm, we want to work with people who are very experienced,” she said. “PEF had a depth of knowledge across venture debt as well as mezzanine debt.

“They’re highly exposed to a wide range of accounting and audit practices from KPMG, RSM, and a number of the other audit firms. And because they work with multiple funds, they have a higher-level overview of the trends and feedback from the SBIC program.”

Results

With the first fund now underway, Pivotal, their Limited Partners, and their portfolio companies have all benefited from PEF’s fund administration services.

Through PEF’s Investor Portal, Pivotal’s Limited Partners have access to a secure online document management and workflow system that manages the distribution of capital calls, distributions, financial statements, K-1s and other general correspondence. The portal also makes it easier for Pivotal to keep investment data organized and accessible for other purposes.

“Instead of having to create a reporting process on our own, we were able to plug into their portal and have all those practices already established, not only for our Limited Partners but also for the SBIC calendar—everything from drawing the debentures to annual audits to other data that we need to see on an ongoing basis for our own projections and modeling,” said Baker.

PEF has also helped Pivotal stay ahead of complex and evolving reporting requirements.

“Because they work with so many firms, they see a number of different scenarios,” Baker explained. “They advise us if something comes up out of the ordinary, and they tend to be one step ahead on directing us as to what’s expected.”

But the greatest benefit for the firm has been the ability to maximize the time they spend with their portfolio companies.

“PEF allows us to do what we do best,” said Baker. “We can leave the administrative part in their hands and really get down to focusing on the day to day with our portfolio companies and meeting with new, innovative companies that could become part of our investment portfolio.”

As Pivotal begins to focus on Fund II, Baker says PEF will continue to be part of the firm’s success.

“We are taking a lot of risk and there are a lot of unknowns, so as much as we’re in the finance industry, we are also very much a relationship-based industry. We value PEF’s ability to enhance our relationships with our portfolio companies and investors.”

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