Many people believe that you can only start a successful investment firm with a big bag of money. They also assume you need many years of experience at an established private equity firm, gray hair, and a big team.

However, these assumptions did not hold me back when I started Arcola 18 months ago. Back then, I believed my time was now. More importantly, I knew I would regret not trying more than failing. This story shares my journey, learnings, and view on private equity.

How I started my private equity firm at the age of 31.

Getting into private equity has always been my goal. At the same time, I always wanted to become an entrepreneur. Therefore, after gaining experience in investment banking and at a leading European private equity firm, I took the calculated risk to start Arcola. What motivated me most was the opportunity to create a vision, execute it, and have a high impact on businesses.

As an entrepreneur, you quickly find out that the highs are much higher and the lows are much lower. Therefore, you need to commit fully to your vision. Otherwise, you will give up soon. You also need to go all in, because you cannot start a private equity firm next to a full-time job. I gave up a regular salary, a team of smart investors around me, and the certainty of available funding for good investments. And no, I did not have a huge bank account to rely on.

To reduce my financial risk, I lowered my personal financial commitments. In addition, I became a member at Sweav. This allowed me to take on-demand and flexible projects as an independent investment professional if I needed to earn money while pursuing my dream. Even though I never did a project, I still felt part of the community. It also gave me a fallback option.

Key skills to run a successful private equity firm?

Years spent at another firm do not necessarily define a successful investor. Of course, experience is very valuable. However, you can compensate for it by being open to advice from Arcola investors, doing thorough analysis, sticking to pre-set investment criteria, and working relentlessly. In the end, private equity is about taking calculated risks.

Elevate success through people skills

In essence, private equity is about finding good investments at the right risk level. Then, you need to execute the business plan carefully and generate return on investment. People skills are essential, because you constantly need to convince the right parties. Even if you get a “no” the first time, you may need to try again. In that case, you need to persuade stakeholders that you are the better party or have the better plan.

Gaining people’s trust is key. For example, a management team needs to believe in a common business plan and execute it. At the same time, a bank needs to trust the transaction enough to finance it. Therefore, keeping all stakeholders on board is crucial.

In addition, you need an excellent understanding of market and business dynamics. This helps you find the right industries to invest in. For example, Arcola reduces risk by investing only in businesses with no or low cyclicality. Analytical skills are also crucial when assessing potential investments. Finally, strong risk management and assessment skills help you take balanced risks.

When you start a firm from scratch, you also need to invest a lot of time, creativity, effort, and perseverance. Experience shows that pitfalls and setbacks can appear at every corner. You will be everything at once: the intern, analyst, researcher, investor, business developer, and administration employee. In addition, you need to stay open to advice, especially from the successful entrepreneurs and investors backing you. That way, you do not have to reinvent the wheel at every turn.

How to manage closing your first deals as a new private equity firm?

Arcola focuses on the SME market and follows a deal-by-deal funding strategy. As a result, we can work with flexible structures. As a Belgian in Amsterdam, I currently focus on the Benelux market. I also see many matching opportunities for SMEs across the border. By now, we have invested in two absolutely stellar businesses: Straatweg Group and Golden Naturals. Both are growing steadily. In addition, both have a business plan to accelerate growth further.

Most investable SMEs do not only want to monetize part of their shares. They also want to attract investors with vision, business-building know-how, and positive intentions toward employees, clients, and other stakeholders.

Private equity is a people business. Therefore, you need a clear vision on how to grow and where to lead all stakeholders. Every investment requires sourcing, execution, and portfolio company management. After the investment, Arcola actively supports management on a daily basis.

Small size as a strategic advantage

Our small size works to our benefit, because we can move very fast. In addition, I have a large network and an active pool of people who can help. This group ranges from investors and entrepreneurs to advisors.

Sweav also proved to be a great support. I started as a member and later became a client. Without the budget to hire top talent full-time, Sweav gives me on-demand access to some of the best business minds in the industry. This could be a commercial due diligence professional, an interim marketing manager, or an operations expert.

Future of private equity in the SME market.

SMEs usually have a single service or product. Therefore, there are often market segments with growth, even when the general economy is under pressure. In addition, SMEs usually have plenty of low-hanging fruit in revenue or profitability optimization. For these reasons, I see strong potential for investments in the SME market.

Arcola coins “positive PE” by incorporating ESG values into our investment analysis and decision-making processes. Our active ownership approach also builds on a duty of care toward all stakeholders.

Connecting ambition and abundance

Ambitious people generally believe in opportunities and abundance. That is also why I organize regular “Buy Out Borrel” drinks to connect private equity investors in Amsterdam. Instead of seeing each other as competition, we can create a strong network. In the future, this network can work to everyone’s advantage.

Arcola’s next steps are to grow the team and expand the investor base. And yes, we are open to unsolicited applications. Once the Benelux market is fully up and running, Arcola will go multinational. We will do this by searching for new investments and limited partners across Europe, with the ambition to invest in SMEs across the continent.