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ImpactAssets 50: A Global Landscape of Impact Investment Fund Managers
The ImpactAssets 50 (IA 50) is the first open-source, publicly published database of experienced private debt and equity impact investment fund managers.
https://www.impactassets.org/impactassets-50

ImpactAssets 50

An Annual Showcase of Impact Investment Fund Managers

IA 50 2021 PROFILE

HCAP Partners

Total Assets Under Management: $100 – 499M
Asset Class: Private Debt - Absolute Return / Notes, Private Equity
Primary UN Sustainable Development Goal: 8 – Decent Work & Economic Growth
Small/Medium Business Development
Diversity, Equity and Inclusion

Firm Overview

Category: Mezzanine Finance

Founded in 2000, HCAP Partners is a private equity firm focused on the lower middle market. HCAP seeks to generate above market rate returns while facilitating a positive impact in underserved businesses, their employees, and their communities. HCAP is investing its latest institutional fund, HCAP Partners IV, L.P. HCAP generally invests in established lower middle market businesses generating between $10M-$100M in revenues and $1M-$5M in EBITDA across a select group of industries located primarily in the Western US. Investments are typically structured as mezzanine debt and preferred equity securities and are used to finance growth, acquisitions, buyouts, and recapitalizations with investments ranging between $2M and $15M. HCAP’s impact approach is operationally focused and based around creating high quality jobs using a framework called the Gainful Jobs Approach. HCAP believes high quality jobs are a key component of economic success and works with its’ portfolio companies to improve job quality.

Firm Headquarters: US & Canada
Years of Operation: 10 years or more
Total Assets Under Management:
$100 – 499M
Total Number of Investors: More than 25
% of Capital from Top 3 Investors: Less than 25%
Investment Thesis:

HCAP invests capital in lower middle market companies primarily located in the Western United States which are underserved by traditional capital sources, including those companies located in low and moderate income areas (LMI) and companies employing individuals residing in LMI areas or earning LMI wages.

Investment Overview:

HCAP Partners' investment strategy focuses on building a diversified portfolio across a number of key sectors including manufacturing, healthcare, business services, and IT services/software, taking into consideration company size, historical and projected performance, and transaction structure. HCAP aims to invest the majority of its capital in companies underserved by traditional capital sources, including those companies located in low and moderate income areas (LMI) and companies employing and retaining jobs for individuals residing in LMI areas or earning LMI wages. HCAP seeks to invest into small businesses with $10M-$100M in revenue, $1M+ in EBITDA, and $2M-$15M in capital requirements. Investments will typically be structured in the form of loans and, under certain circumstances, HCAP will consider making opportunistic structured equity investments of approximately 30% of deployed capital. Funds will generally be used for growth-oriented working capital, recapitalizations, acquisition of another company, or capital investment.

Company Differentiator:

HCAP Partners differentiates itself from its peers by working diligently towards its longstanding commitment to creating and preserving quality jobs and through its proprietary impact framework, the Gainful Jobs Approach™. HCAP actively engages with its portfolio companies to improve job quality standards with a focus on economic opportunity, which includes broad-based participation, opportunities for advancement, and sustainable livelihood, as well as health & wellness, which includes paid sick days and wellness initiatives. HCAP assesses job quality standards at the outset of the investment and works with company management to create and implement a roadmap for job quality improvements which are tracked and measured regularly throughout the investment. HCAP is also an industry leader in building a scalable, real-time software dashboard that provides meaningful data to portfolio companies which they can use to make informed decisions around improving job quality and an enhanced impact measurement and reporting functionality for Limited Partners. 

Investment Example

Confirm BioSciences is a women-owned provider of diagnostic testing and health and wellness solutions. HCAP has worked diligently with the company's management to assess job quality standards based on HCAP's Gainful Jobs Approach, then created a roadmap to implement and measure job quality improvements. Confirm BioSciences has completed four of seven strategic roadmap goals for 2020 and improved job quality for all staff. The company is focused on maintaining a strong workplace culture given the changing work environment due to COVID-19, with new benefits such as financial hardship PTO and expanded use of gym and education benefits. In 2020 the company signed a “carrot agreement” with HCAP, a pool of capital funded if HCAP meets a certain return threshold and the company has made meaningful improvements in job quality standards during the investment. The proceeds of this capital are used towards further supporting the LMI employee base during or post-exit.

Leadership and Team

Cumulative Leadership Experience in Investing:
30 years or more
Cumulative Impact Experience of Top Three Firm Leaders:
20 – 29 years
Tim Bubnack – Managing Partner More Info

Tim Bubnack joined HCAP Partners in June 2007 and has more than 25 years of lending, technology investment, and financial experience. Tim is currently representing HCAP Partners as a Board Director for RPI, Cubex Systems, and AMFM Healthcare and is a Board Observer for Lone Star Analysis and TCS Healthcare. Prior to joining HCAP, Tim spent five years with Silicon Valley Bank as Managing Director of commercial banking activities in the San Diego region where he managed early stage and middle market banking relationships in the technology, communications and biomedical industries.

Frank Mora – Partner More Info

Frank joined HCAP Partners in February 2013, and is responsible for originating, structuring, closing and monitoring portfolio investments. He is currently a board observer or actively involved in PriMetrica, Burke Williams, eLearning Brothers, and Veyo. Prior to joining HCAP Partners, Frank was with DBI Capital, a Southern California based lower middle market private equity buyout group. Frank joined DBI in 2006 where he was responsible for sourcing and structuring investment transactions, including co-investments into two HCAP Partners portfolio companies.

Hope Mago – Partner More Info

Hope joined HCAP Partners in May 2009. Hope participates in the origination and analysis of new investment opportunities, investment due diligence, deal underwriting, and investment monitoring. In addition, he has led the development of impact investing initiatives since joining the firm and contributes to thought leadership in the impact investing space. Hope is currently a board observer or actively involved in Arosa, CortiCare, TCS Healthcare Technologies, and Sleep Data. Prior to joining HCAP Partners, Hope worked as an Analyst at the Reserve Bank of Zimbabwe where he was involved in economic policy formulation, lending due diligence for export ventures receiving funding through the Export Support Facility under the Exchange Control Division.

Percentage of Investment Professionals who identify as women:
Less than 25%
Percentage of Investment Professionals who identify as a person of color:*
50% or more
Percentage of Senior Management Team who identify as women:
Less than 25%
Percentage of Senior Management Team who identify as a person of color:*
50% or more
*People of color include: Black, Latinx, Asian, Native American/Alaskan Native, Pacific Islander, Middle Easterm and multi-racial Americans

Financial Performance

Target Financial Returns Relative to Benchmark:
Above Market Rates
Actual Performance Relative to Target Financial Returns in the Past Three Years:
In line with initial target returns
Financial Reporting Frequency to Investors or Donors
Quarterly

Impact Performance

Percentage of Total Assets Under
Management that are Impact Investments:
75% – 99%
Primary Impact Outcomes:
Creating jobs
Increasing access to healthcare services and improving health
Secondary Impact Outcomes:
Increasing access to education and improving educational outcomes
Increasing access to financial services
Addressing Racial Inequality
Addressing Gender Inequality
Value-added Services Offered:
Business and legal training
Health services
Other: Corporate governance

Investments systematically include social and environmental sustainability practices in the due diligence process:

During the due diligence process, HCAP Partners works with portfolio company management to assess current job quality standards through the lens of HCAP's Gainful Jobs Approach. They then collaborate on a roadmap to improve job quality standards which is tracked and measured and reported to our Limited Partners.

Impact Tracking and Monitoring

Impact is Tracked:
Yes
Social and/or Environmental Impact is Reported to Investors and Donors:
Yes – to investors and donors
Third Party Validations:
Participant on steering committees or leadership roles within impact industry associations
Publisher or contributor to industry white paper or other research in impact investing

Learn More

Key Contact Name: Jennifer Neivert
Phone: 858-864-9210
Mailing Address:

3636 Nobel Drive, Suite 401, San Diego, CA 92122 USA

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