Michel arrieta has worked in the tech world in fast growing startups and large scale IT companies. Now, in the private equity business, he thinks small.
He thinks of small family service businesses, that is.
He founded Equity of the garden city, an Atlanta-based private equity firm, to invest in the “very convenient, simple, sexy businesses” that underpin the US economy. “I’ve always thought boredom is beautiful,” he told Hypepotamus. “I just like something that you can actually touch and feel and see. I just wanted the simplicity of simple products with ordinary people, like what you see with home care, dry cleaning, roofing, and pest control companies.
The team behind Garden City sees opportunities for innovation and sustainable growth at the community level in these types of service companies. “We’re really trying to reinvent private equity, reinvent service companies and incubate ideas,” Arrieta added.
He just closed a $ 51,450,000 oversubscribed round to do just that.
A different perspective on private equity
Garden City’s investment thesis is community-centric. Unlike the traditional “buy and return” model seen in private equity, Garden City was built as a holding company with plans to own a business permanently while introducing little to no debt (think Berkshire Hathaway for small and medium enterprises).
Garden City plans to invest in service-oriented businesses that have been around for more than seven years and generate at least $ 2 million in real profit or profit per year. These include essential services and residential businesses that have kept the economy and families safe during COVID.
Introducing little or no debt when buying the business, said Arrieta, will help service businesses “focus on growing, not paying down debt.”
This presents a significant opportunity for Garden City and for business owners as the U.S. economy braces for the “Silver tsunami”Of the retirement of the baby boomers.
“The baby boomers were the most entrepreneurial generation in our country’s history,” added Arrieta. “Right now in America, there are over 250,000 small businesses that generate between $ 1 million and $ 10 million in net income. Many are currently owned and operated by people over retirement age or without a liquidity or inheritance plan. “
The intention behind such businesses is to create a people-centered culture, deliver technology solutions, and connect owners with their advisors and investors to help a service business continue to grow.
Garden City’s investment thesis and hands-on approach has attracted an impressive roster of advisors in the tech, business and philanthropy worlds to date. These include “mission-aligned, value-added investors” in Atlanta like Kyle Porter and Rob Forman of Salesloft and Jeff Muir of Fulcrum Equity Partner.
Other investors include Horst Schulze, founder of Ritz Carlton Company, and Rick Smith, former CEO of Equifax.
Technology and innovation in the service industry space
Pest control or roofing may not seem like the most ripe industries for technological disruption. “If you do not know the problems that exist in [that industry], which engineer, product manager or entrepreneur will create it? Arrieta added.
The team behind Garden City sees an opportunity to implement existing software – or bring in engineers to develop new industry-specific solutions – to help service company employees do their jobs better.
This innovation also extends to the traditional thinking model behind private equity and investing in general.
“We are not an impact investing firm. But are we making an impact? Without a doubt, we are. We sit down with every worker, from the guy pouring his cement to the person answering the phone, and we ask Who are you? What are your goals in life? What do you like working here? And what would you like to be able to change?
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