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Published in Finance

GR Venture Capital scours market for small biz investments, acquisitions

BY Sunday, June 20, 2021 05:10pm

As an investor and acquirer of small businesses, Steve Barnes is scouting a market that appears to hold plenty of opportunity.

Barnes, an entrepreneur who previously co-founded three wireless companies, formed GR Venture Capital LLC a year ago to capitalize on ongoing generational shifts and invest in small businesses that he can grow.

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He recently closed on the acquisition of Grand Rapids-based Professional Courier Services, a same-day, small package delivery and errand service whose owner, Cathy Smith, wanted to retire.

GR Venture Capital typically targets small businesses that have between $200,000 and $2 million in EBITDA (earnings before interest, taxes, depreciation and amortization), where Barnes can support a new generation of business owners through majority investments or minority deals to help owners transition their companies to new ownership. In a minority investment scenario, he’s looking for situations in which a seller will remain with the business in an operating role.

“One major goal is to help younger entrepreneurs like myself 10 years ago,” said Barnes, 32, who believes a “generational wave” is occurring in entrepreneurship. “There’s going to be more entrepreneurs than ever, more businesses than ever, and (I want to) help them get a channel to find or grow their investment in their business.”

GR Venture Capital aims to complete two or three investments annually and focus on technology and distribution companies in West Michigan, although the quality of a deal matters more than quantity, he said. 

Barnes formed GR Venture Capital as a way to invest the proceeds from the 2018 sale of Genius Phone Repair, a company he co-founded in 2011 with two partners. They grew the business to 18 retail locations in Michigan and Indiana.

“I was looking for a new business to jump into,” said Barnes, who looked at about 150 businesses before buying Professional Courier Services. “Right now, it’s the stage of my career where I had the opportunity to find something new and this is Grand Rapids-based, where I live. It’s the right size and it gives me the opportunity to have flexibility and to grow it, and I believe it’s in a great market and that this style of transportation is only going to grow.”

Barnes continues to co-own two wireless businesses, Mobile Defenders and Tech Defenders, which his partners and co-founders operate. He also has invested in a close friend’s olive oil business in Italy to help him sell products in the U.S.

GR Venture Capital operates more as a family office or private equity, as opposed to traditional venture capital as the name implies. However, Barnes and his partners are considering whether to form a venture capital fund.

“We’re toying around with creating a fund in the Grand Rapids area over the next year or two, whether it’s under the GRVC name or something else,” he said. “It’s something we want to do in the future.”

Barnes targets additional small businesses deals amid what Matt Baas, a partner at Grand Rapids-based Small Business Deal Advisors LLC, considers to be a strong market, as many companies are now coming to market after going through the harsh economic downturn last year during the COVID-19 pandemic.

Some business owners who delayed their exits are now seeking to sell, while others are accelerating existing exit plans, said Baas, who represented Smith at Professional Courier Services in the sale to Barnes.

“It’s been really strong. We continue to find sellers that are ready to move forward. A lot of them have managed through the past year, but are still at the point that they need to retire,” Baas said. “At this point … it’s just time to get out, whether to retire or do something else. We have run into a few that are in that position.”

He thinks record available capital and low interest rates have created a strong market with high valuations that may lead some business owners to act now rather than wait any longer.

“They may have been looking recently — maybe over the past few years — but weren’t ready to pull the trigger,” Baas said. “Seeing these other opportunities and incentives maybe pushed them further along in that trajectory.”

At the same time, “a ton” of prospective buyers are also scouring the market for deals, according to Baas.

The pandemic and economic fallout have generated a rise in entrepreneurship among people who lost their jobs or who decided to buy a small business to run, Baas said. In his estimation, more people are deciding “I want to own my own business, I want to be in control of myself, and they’re venturing out and doing something on their own,” similar to what occurred in the wake of the 2008 financial crisis.

A first quarter report by online small business marketplace BizBuySell.com found heightened demand among buyers “is likely here to stay,” as small business ownership “has become a haven for individuals seeking security in times of uncertainty.”

In a quarterly BizBuySell.com survey, one of five respondents buying a business said they were newly unemployed and 37 percent said they were unhappy with their job and wanted control over their future.

“The pandemic has presented a wakeup call for American workers who have faced job loss or stay-at-home downtime to assess their future,” according to the quarterly BizBuySell.com report.

Read 2092 times Last modified on Monday, 21 June 2021 11:20
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