Welcome to the first NepFin Quarterly Newsletter, where we provide our partners with the need-to-know about the lower middle market. In our inaugural edition, we discuss the intersection of technology and lower middle market lending.
As a lower middle market lender, we are firm believers that technology will revolutionize private capital markets. We’re already seeing the change today; tools like Salesforce, ConstantContact, Pitchbook, and LinkedIn have crept into the day-to-day of deal professionals. While innovations in CRM and marketing are a great step in the right direction, the industry has barely scratched the surface when it comes to technology adoption. At the same time, while these innovations allow the industry to have a more efficient approach to their workflow, there is still a lack of innovation when it comes to tools and software dedicated to lower middle market deal professionals.
The state of the lower middle market
The middle market is roughly a third of the country’s private sector GDP and more than $6 trillion in annual revenue. The bulk of these businesses fall into the lower middle market; businesses that make between $10 - $100M in revenue. However, when it comes to accessing capital to build their businesses, the lower middle market is dramatically under-served. This is, in part, thanks to the multi-decade consolidation in the commercial banking sector, along with regulations such as Dodd-Frank, which effectively disincentivizes banks from making cash flow-based, non-collateralized loans to lower middle market companies.
Today, non-bank lenders have proliferated to satisfy the unmet need in the debt market. However, with more than 1,000 options to choose from, the process of securing financing through these channels can be cumbersome and inefficient for both the borrowers as well as intermediaries like investment banks and private equity that offer capital solutions to middle market businesses.
Propelling the lower middle market forward
We’ve built NepFin to move the lower middle market forward. This means building technology that enables us to be faster and competitively priced. To be clear, we’re not replacing humans with robots. Instead, our technology is helping the lifecycle and nuances of a lower middle market deal. We know the industry requires the expertise of an experienced investment professional, and financing will always be a relationship-driven business. This is why we have surrounded our seasoned investment team with Silicon Valley engineers, resulting in a collaborative group of talent focused on modernizing the lower middle market.
We recently launched the Lower Middle Market Update, a weekly newsletter built to provide you with exclusive intelligence on lower middle market deals. Much like the search engine giants, we have built web crawlers to aggregate the investment activity occurring in the lower middle market and we are identifying many transactions not captured anywhere else.
At NepFin, we want to share our technology and insights with our partners like yourself and add value beyond simply accessing capital. Perhaps you are a private equity firm looking for add-ons for an HVAC platform. Or perhaps you are an independent sponsor looking to source mezzanine capital for your first deal. Let us know how we can be helpful!
We are excited to have you on this journey with us.