How Raleigh investor’s new fund looks to leverage SBA for deals

By Lauren Ohnesorge
Senior Staff Writer, Triangle Business Journal
Apr 27, 2021

Two years in, and a veteran Raleigh investor is again hunting for middle market deals at investment startup SharpVue Capital. The Raleigh firm’s latest fund, called SharpVue Capital Credit Fund II, has raised nearly $41.5 million from 32 investors so far, according to a securities filing.

And it’s not finished, said Doug Vaughn, managing partner at SharpVue.

He said the plan has always been to have an SBIC fund – Small Business Investment Companies – and this is the vehicle to do it, provided the company is successful in its pursuit of a license. SBICs are privately-owned, managed funds licensed and regulated by the U.S. Small Business Administration. They use their own capital to funnel equity and debt investments into small businesses – but being an SBIC allows them to also add in funds borrowed with an SBA guarantee. Vaughn’s history at Triangle Capital Corporation (Now Barings BDC) has him familiar with the vehicle – and he calls it an enticing option for SharpVue.

“If you are awarded a license, they provide leverage off of your equity dollars,” he said. “That’s pretty attractive.”

SharpVue has applied for just such a license – and could hear back soon. Its first fund was an unleveraged, smaller fund “just to continue and monetize our deal flow,” Vaughn said, pointing to the fact that the SBA process can take a long time. But he reiterates that the SBIC option was always the direction the firm was pursuing. It officially started the process of going after a license when the first fund was half deployed, about a year ago, Vaughn said. He’s optimistic that the firm will clear that process soon – as are the firm’s limited partners, which are already backing the new fund with their dollars.

The company has commitments for 70 percent of its target, Vaughn said.

He hopes to close the full round later this year. Once the SBA license is obtained, the plan is to deploy that SBA leverage as part of the fund. “Demand has been good,” he said, noting that the first fund has already met expectations.

“For us, it’s always been a relationship business,” Vaughn said. “That’s why we like the lower-end of the middle market. Relationships still do matter. … It’s not just a matter of who can write a check.” And relationships have helped pull the firm through the pandemic, he said.

“We were underwriting some sort of pull back in all the deals,” he said. “That conservatism helped us. … We were very fortunate that every one of our companies appears to have come out on the other side.”

SharpVue’s past investments have included firms such as California-based Pondera Solutions and Durham’s Counter Culture Coffee.

Former North Carolina Budget Director Lee Roberts and Vaughn, previously the senior managing director and chief administration officer at TCAP, spun off SharpVue Capital from Curi (formerly known as Medical Mutual) in 2019.