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​Today, there is a growing demand for private equity funds, especially for accredited investors and institutional investors. An accredited investor is an individual or business entity allowed to trade securities not registered with the Securities and Exchange Commission (SEC). An institutional investor, on the other hand, is an entity that invests on individuals' behalf and includes insurance companies, pension funds, mutual funds, sovereign wealth funds, and university endowments.

That said, not just anyone can start a private equity fund. It typically takes about 10 years for a person to acquire the necessary experience required to begin such an undertaking. Notably, most founders are 40 and older.

The most common experience and backgrounds of those starting private equity funds today include principals and vice principals at mega-funds (MFs) and upper-middle-market (UMM) firms, and partners and managing directors with experience in economics. Others include managing director-level bankers with investing experience and chief-level (C-level) executives with extensive investor relationship experience.

For such individuals, there are certain steps to take when they decide to start a private equity firm. While there are no specific guidelines on the steps one should take, there are some basic steps most executives take. These include writing a business plan, working out legal details, raising capital, hiring a team, and determining a fee structure.

A business plan is a blueprint detailing important information such as the private equity fund's expected cash flow and the fund's timeline, including the capital-raising period, and other instructions such as how to exit from investments. In most cases, a private equity fund has a 10-year lifespan, however, the exact timeline is usually only known to the managers. The business plan also contains an outline of how the fund will attract investors, how it will grow over time, and an executive summary to pull every detail together.

Most private equity firms in the United States are limited liability firms or limited partnerships. After completing a business plan, it will be necessary to hire attorneys who will assist with the legal work. Attorneys are especially helpful to new managers, since they help them with their know-your-customer (KYC) procedures and due diligence. Among the important documents include a subscription agreement, articles of association, marketing fund operating memorandum, due diligence questionnaire, custody agreements, compliance and risk guidelines, investment management agreement, and violation policy.

After completing the business plan, it is also crucial to decide how funds will be raised. This is always the biggest challenge, since it involves convincing investors to fund a startup. To gain credibility, it is vital to have a fund established at the outset. A common approach is to first invest in one's own fund. Previous successful fund managers are expected to fund at least 2 to 3 percent of their own money. For new managers, they can contribute 1 to 2 percent to the initial fund.

Hiring a team is another important step. The ideal minimum number is three partners. Starting a private equity fund individually or with just two people is risky due to the "key person risk." This refers to where a business loses value or reputation due to a key person's demise, incapacitation, or other event causing them to leave the firm. Apart from the key partners, other hires are necessary. Importantly, it is advisable to hire non-traditional candidates: people with relevant experience who can get the job done at an affordable salary. As the fund grows, such hires get promoted, since the firm can then comfortably pay them. The important consideration in picking a team is getting people with the required skill sets.

Calculating the fee structure is also paramount. Fund managers usually determine the management fees, carried interest (the fund managers profit participation), and hurdle rates (the minimum return on investment that must be realized before managers share in the profits). Such managers typically get management fees of 2 percent of investor-committed capital. Nonetheless, new managers may receive just 1 percent. Usually, the set carried interest is about 20 percent above an expected return. With the hurdle rate, the managers and investors split about 20 percent and 80 percent, respectively. It is also vital to establish compliance, risk, and valuation guidelines during this step.

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​Today, there is a growing demand for private equity funds, especially for accredited investors and institutional investors. An accredited investor is an individual or business entity allowed to...

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Resilience Capital Partners Names Tim Seitter as CEO of CR Brands

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Resilience Capital Partners Names Tim Seitter as CEO of CR Brands

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An experienced principal investor, Bassem Mansour of Hunting Valley, OH, serves as the co-founder, managing partner, and co-CEO of Resilience Capital Partners. Based in Ohio, this company is a private equity firm focused on acquiring companies in special situations, like restructurings or corporate divestitures. As co-CEO, Bassem Mansour oversees the firm’s portfolio companies, including the recent naming of Tim Seitter as CEO and president of its portfolio company CR Brands.

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An experienced principal investor, Bassem Mansour serves as the co-founder, managing partner, and co-CEO of Resilience Capital Partners. Based in Ohio, this company is a private equity firm focused on acquiring companies in special situations, like restructurings or corporate divestitures. As co-CEO, Bassem Mansour oversees the firm's portfolio companies, including the recent naming of Tim Seitter as CEO and president of its portfolio company CR Brands.

A consumer packaged goods company based in West Chester, Ohio, CR Brands maintains a portfolio of several licensed cleaning products, including ARM & HAMMER ESSENTIALS Disinfecting Wipes. One of the company's chief licensors is Church & Dwight, where Tim Seitter served as vice president of marketing and head of the company's Oral Care Strategic Business Unit. Due to this experience, he has a firm grasp of CR Brands' operations.

In addition to his knowledge of CR Brands, Seitter has over two decades of experience in the consumer packaged goods industry. Not only was he an executive at Church & Dwight, but he also held such titles as president of the Americas and Europe for ClinChoice, Inc., and other leadership roles at Spalding Sports and Kraft Foods. With an established track record of growing brands, Seitter is an excellent choice for leading CR Brands as it introduces new products.

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Resilience Capital Partners Names Tim Seitter as CEO of CR Brands

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An experienced principal investor, Bassem Mansour serves as the co-founder, managing partner, and co-CEO of Resilience Capital Partners . Based in Ohio, this company is a private equity firm focused on acquiring companies in special situations, like restructurings or corporate divestitures.