Most headlines about private equity cover the mega-deals of billion-dollar funds. But what if your target is a $3M HVAC company or a $4M healthcare services provider?
What is micro private equity?
Micro private equity (micro PE) refers to private equity investments in very small businesses — typically with enterprise values under $5 million and EBITDA often in the $500K to $2M range.
Whereas traditional private equity firms focus on deals in the tens or hundreds of millions, micro PE focuses on Main Street and lower–middle market companies, such as:
- HVAC and plumbing contractors
- Healthcare service providers
- Small manufacturing shops
- Local/regional business services
Independent sponsors pursuing micro private equity (micro PE) deals face their own brand of challenges. Deals in this range are too small to meet the minimum investment sizes of most traditional capital providers.
Key hurdles include:
- Limited institutional interest in sub-$5M deals
- Owner-operator business dynamics
- Local and regional market focus
- More hands-on operator involvement
That’s why specialized micro private equity investors and flexible capital providers are essential for independent sponsors.
The Top Investors for Micro PE Deals
1. CapitalPad – SMB Specialists
- Deal sweet spot: From $500k EBITDA up to $2M EBITDA
- Strengths: Streamlined process, post-LOI focus, friendly to small operators
Micro PE Advantages:
CapitalPad is one of the main investors for micro private equity deals (SMB acquisitions). Independent sponsors benefit from their ability to move quickly after an accepted LOI, making them a practical capital partner for micro PE.
Where to Start: Create a sponsor account on CapitalPad to submit your deal. CapitalPad invests directly in micro-PE deals, and also allows sponsors to raise additional capital on their syndicated platform, which is always free.
2. True West Capital Partners – Flexible and Fast
- Deal minimums: None (barrier-free)
- Strengths: Creative structures, rapid approvals, adaptability for unique SMB situations
Micro PE Advantages:
True West’s “no minimums” policy makes them accessible to independent sponsors pursuing smaller acquisitions. Their ability to customize structures helps sponsors close deals that others would not consider.
Where to Start: Review the investment criteria to see if they’re the right fit for your deal.
3. Avenue Capital Partners – Operational Specialists
- Typical investment range: $3–15M EBITDA (fits larger micro PE deals)
- Strengths: Complex business turnarounds, operator improvement focus
Micro PE Advantages:
For independent sponsors targeting businesses with operational complexity, Ocean Avenue offers strategies to unlock value. Deals on the larger end of micro PE can fit within the firm’s investment criteria.
Where to Start: Learn more about how to partner with them here.
4. Individual & Angel Investors – Operator-Driven Capital
- Investor type: High-net-worth individuals, former operators, industry veterans
- Strengths: Flexible terms, relationship-driven, hands-on guidance
Micro PE Advantages:
Experienced individual investors often have a deeper understanding of niche industries than institutions. For independent sponsors, partnering with a former operator can offer both funding and mentorship—two valuable assets that are hard to find together.
How to Access: Industry conferences, local business groups, referral networks.
5. Regional Investment Groups – Local Market Knowledge
- Focus: Geographic specialization, community relationships
- Strengths: Lower deal minimums, regional market expertise
Micro PE Advantages:
Local groups know the businesses, owners, and dynamics of their region. For independent sponsors pursuing micro deals, regional investors can be quicker to trust and more open to smaller equity checks.
Examples: Regional business development corporations, local family offices, industry-specific investment groups.
What Sets Micro PE Apart
Independent sponsor micro deals differ from traditional private equity in several ways:
- Sub-$5M enterprise values
- Relationship-driven transactions
- Flexible deal structures (often non-institutional)
- Higher operator involvement after the acquisition
- Due diligence tailored to the realities of small businesses
Sponsors who understand these differences and connect with the right micro PE capital providers are in a better position to source and close small business acquisitions.
How to Build Investor Relationships in Micro PE
For independent sponsors, securing capital is only part of the equation. Success in micro private equity also comes down to networking and trust-building.
Tips for sponsors:
- Engage with regional business associations and chambers of commerce
- Build credibility through small wins and operator references
- Connect with family offices that focus on small deals
- Explore search fund investors who crossover into micro PE
Final Thoughts
Independent sponsors pursuing micro PE deals are playing in an underserved but opportunity-rich corner of private equity. By targeting investors who specialize in small business acquisitions, from value-add investors like CapitalPad, True West, angels, and regional groups, can navigate the challenges of sub-$5M deals and achieve meaningful returns.
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