Much of the challenge we face, which creates the opportunity, is not only identifying the next best investment and management team to execute, but creating the proper investment structure that allows for a de-risking of committed capital for an exit in one to five years while capturing upside returns. Topping Capital prides itself on finding solutions for emerging stage growth companies and small businesses to access preciously needed growth capital. Our solutions are a win-win for both management teams and investors. Some examples of our solutions and pathway to unique and sometimes exclusive investment opportunities:
- Distressed Real Estate - 2009 to 2012 #realestate
The fallout from the Financial Crisis of 2008 created a similar opportunity in Illinois in distressed real estate to that of what transpired during the days of the Resolution Trust Corp when three of the nation’s top ten banks – all Texas banks – went under. Fast forward to the 2007-2009 crisis and an opportunity was created for investing in distressed real estate. Topping Capital identified a management team with fifteen years of acquisition experience ($100 million) and a significant JV financing partner who had never raised any outside capital. Topping Capital worked with the company as they launched a fund I of $6 million, a fund II of $12 million and a third fund of $19 million. Topping Capital clients committed approximately $5 million of the $37 million. The first two funds returned in excess of capital committed within eighteen and thirty-three months while retaining assets. The third fund called less than 60% of capital committed, has returned 75% of invested capital and holds a significant asset (mobile home park) in a well desired north shore Chicago community and will very likely record the highest IRR of the three funds.
- B2B and B2C Platform Lending Space - 2012 to Present #fintech
Topping Capital was an early identifier of the potential of lending platforms to disintermediate banks. With an initial group of equity investors in 2012, including Topping Capital clients and the founders of a successful $1 billion fintech exit, Topping Capital invested in the initial equity of a business to peer income share agreement business model. Subsequent to the equity round that launched the company’s initial growth, Topping Capital, its fund, and its clients participated in a convertible round offering and portfolio purchases. Rob Topping, Managing Member of Topping Capital, sits on the advisory board of this B2C Company.
- Revenue Note to Solve for Potential Down Round and Revenue Ramp Timing - 2013 #realestate
One Topping Capital client (a software firm) engaged us to help address not only a capital need but the real issue of a possible down round financing which usually reduces the potential investor pool by half. Our firm also realized a revenue ramp, while likely imminent, ran a risk as to timing. By structuring a step up coupon note, that allowed a variability of payment tied to revenue, we provided flexibility of timing to the company. Additionally, our investors would get a yield instrument that where when paid back would get "rewarded" with approximately 10% equity of the firm at a valuation that did not create a "down round financing" for the company.
- Wireless Security Solution for Hospitals and Schools - 2015 #healthcare
We were provided with a unique and exclusive opportunity for Topping Capital clients to become part of the capital solution for an exciting wireless security badge company. In today's world of heightened security concerns this company addressed a revenue positive solution for hospitals and schools for greater oversight of vendor and contractors traffic flow through their facilities. This pre-pay model needed a small amount of capital to hire needed employees to roll out badges in a first group of hospital systems. We participated in a one year maturity debt instrument with an 8% coupon and five year warrants. The initial capital need of $1 million was downsized to $500,000 as hospital orders and funding for initial orders exceeded timing and initial estimates.
- Growth opportunity for "startup" seeking a considerable investment - 2015 #healthcare
We worked with a healthcare management team who had sold their previous company in 2009 for over half a billion dollars. They wanted to "get the band back together" for a second go around but the challenge was finding a private equity (PE) growth firm willing to think outside of their valuation parameters box. While the investment opportunity did not meet cash flow and revenue parameters of a normal PE mandate, Topping Capital identified a firm and presented the case that a management team that had previously grown a company to $130 million in revenues, had customers in place and many of the same team members back might actually carry less risk than some investment candidates that "met" more traditional investment guidelines. Most importantly we feel we found two groups (investors and operators) that would work well together building a great company.
- Velocity #merchantbank
While Topping Capital is certainly categorized as a small business we like to think big. Our agnostic business model (migration to the greatest opportunity) and it's hub and spoke structure (strategic partners) allows us to move at a great velocity when addressing company’s needs. A good example of such is the last four months of 2015 where we assisted or advised to eight companies in capital transactions ranging from healthcare, to real estate technology, fin tech and digital media. We know small business because we are one.