Brett Hickey is the Founder and Chief Executive Officer of Star Mountain Capital LLC, a specialized asset management firm focused on investing in the largest segment of the US economy – private and established small and medium-sized businesses. Star Mountain is a thought leader which has created a niche for itself as a leading investment partner, bringing proven, large market resources and expertise to smaller businesses, which typically have revenues of over $10 million and EBITDA of under $20 million, often referred to as the “lower middle-market.” Star Mountain’s mission is to create superior risk-adjusted financial returns for investors and to also create substantial positive economic impact and job creation by investing in and helping build smaller businesses – Investing in the Growth Engine of America®. Here Brett tells CEO Today more about it.
Can you tell us more about Star Mountain and your career path?
Star Mountain’s unique “Collaborative Ecosystem” includes custom-built technology, an educational and networking events platform, experienced team members who have run multi-billion-dollar investment platforms and over 30 advisers who are former senior executives from firms such as KKR, Morgan Stanley and Goldman Sachs. Star Mountain represents one of the largest small and medium-sized business investment platforms in the US with a portfolio of over 200 companies and local investment partners in over 20 cities.
I have been investing in private US small and medium-sized businesses since 2004. Prior to being a principal investor, I was an Investment Banker at Salomon Smith Barney/Citigroup where I covered asset managers and financial institutions. In that role, I analysed and underwrote leading fund managers and financial institutions across multiple asset classes, ultimately working on over $20 billion in completed strategic acquisitions and capital raises.
I received a Bachelor of Commerce with Distinction from McGill University (Finance Major and Accounting Concentration) and graduated from Harvard Business School’s Owner/President Management Program (three-year executive program for business owners). I am a frequent guest lecturer on industry panels and at academic institutions. I am also a former Canadian national gold medallist and North American medallist in speed skating.
Core to Star Mountain Capital’s corporate culture and as an active philanthropist, I founded the Star Mountain Charitable Foundation, a not-for-profit 501(c)3 focused on improving lives through economic development, including job creation, health & wellness and cancer research. Notable missions include helping match veterans and women with high quality small and medium-sized business career opportunities across the country, including within Star Mountain’s portfolio which in aggregate represents over 200 companies. I have received multiple recognitions for my philanthropic efforts including the Pathfinders to Peace Award from Shinnyo-En Foundation (promoting volunteerism and peace), A Guiding Star from AYUDA (helping students with financial needs) and the Philanthropic Achievement Award from A Caring Hand (benefiting bereaved children).
How did the idea about Star Mountain come about?
Approximately 90% of the businesses in the United States have less than $100 million in revenue, are typically owner-operated, and are not controlled by large private equity sponsors. We call these companies the “Growth Engine of America,” since this area of the US economy is where most job creation and economic impact is created. Star Mountain is built to specifically address the challenges and opportunities of investing in these established smaller US-based companies. We invest into this asset class first and foremost as a direct investor into companies, and also as a strategic fund investor. As the latter, we make both strategic primary and secondary fund investments whereby we purchase assets and fund positions from other investors in lower middle-market funds that are also investing in US smaller businesses. This approach provides us with substantial information, deal flow and portfolio management competitive advantages, all of which allows us to create what we believe are superior investment products and returns for our investors.
What were the goals that you arrived with when founding the company?
As previously noted, approximately 90% of the businesses in the United States have less than $100 million in revenue. There are approximately 200,000 established businesses in the United States that have between $10 million and $150 million in annual revenues. Many of these businesses are seeking value-added debt and equity investment partners to help achieve their objectives. It was in this context that I founded Star Mountain Capital. The strategy was to have partners and engaging industry advisors throughout the United States to provide us with ample coverage to create superior risk-adjusted financial returns for our investors and to also create substantial positive economic impact and job creation by investing in and helping build smaller businesses across the United States.
What does the business look like today?
We are fortunate to have built an experienced team who are passionate about our mission of achieving strong investment returns and positively impacting the US economy and growing jobs. Our senior team are a mix of investment professionals with 20+ years of experience investing in smaller companies, as well as those such as our Chairman and Vice Chairman who have run multi-billion-dollar investment platforms. Our Chairman, Brian Finn, was the former Global Head at Credit Suisse Alternatives responsible for a portfolio of alternative investment teams and strategies totalling over $100 billion in assets. Our Vice Chairman, Bob Long, was the former Head of a Bank of America strategic investment group representing over $7 billion in private equity and credit investments. Today, Star Mountain represents one of the largest small and medium-sized business investment platforms in the US with a portfolio of over 200 companies and local investment partners in over 20 cities. As a testament to our team at Star Mountain, we were recently named one of the 2017 Best Places to Work by Crain’s New York Business.
What challenges would you say you and the company encounter on a regular basis? How are these resolved?
We are always asked how we see rising interest rates impacting the wider industry and specifically Star Mountain. We do not believe rising interest rates will have much of an impact on our portfolio. With already attractive double-digit cash interest rates, we are more of an absolute return strategy across various market conditions and this has been proven to be highly consistent with little volatility or correlation to the wider public markets over time. Some of our loans have floating rate structures, while others have warrants and other equity positions that should increase in value, on a systematic basis, if the market is growing and rates are increasing.
How are these challenges set to change, in conjunction with the advent of technologies and the potential future needs of clients?
Technology is creating substantial changes in the way we all do business, in some industries faster than others. The impact of technological disruption in the alternative investments industry, while it has occurred at a slower pace than other industries, is no different. As an innovator and investor in established private small and medium-sized businesses, technology for Star Mountain is at the core of our operating model with values such as innovation, collaboration and investment in long-term growth. From the beginning, we invested in technology to build our competitive advantage, including adding a full-time Chief Technology Officer as a partner, to invest in the sustainability, scalability and user experience for the benefit of our stakeholders. Star Mountain has invested into technology and systems out of the belief that technology can provide significant competitive advantages in sourcing investment opportunities, underwriting, monitoring investments, adding value to portfolio companies, managing risk and investor reporting.
To ensure that our clients and future clients receive the best support and advice from us, Star Mountain continues to build a roster of advisors and operating partners which we rely on extensively for support. This is one of the ways we bring large market expertise, relationships and resources to smaller companies.
What are your aspirations for the future of Star Mountain? What do you hope to accomplish in the next 2-3 years?
Moving forward, we are very excited by what the future holds for our business. We have a large market to execute against but that is what we were built for which can be summarized by four core elements. First, we invest defensively in established, smaller companies with low leverage. Secondly, we get paid for work where we concentrate on more labour-intensive loans to private businesses that have complex capital needs, such as financing an acquisition. Third, we help these companies grow, employ more people and create value in their communities and in the economy.
Lastly, with respect to the team, our most important asset, we focus on high quality people who want purposeful and engaged lives, and we find these people maximize long-term value as aligned partners in what we do.
We always welcome ideas, suggestions and people looking to engage with us on any fronts. Please connect with us via our many social media assets and numerous events and webinars that we host and speak at across the country every year.
Media contact: Lauren Cooper