Details & Features
| Asset Type | Lower middle market M&A: Independent sponsor and search fund deals |
| Minimum Investment | $25,000 per deal |
| Sourcing Fee | 0% |
| Management Fees | 1.5% (one-time, not recurring) |
| Platform Carry | 20% |
| Accredited Investor Requirement | Yes |
| Ability to Invest Through Your IRA | Yes |
| Average Time to Liquidity | 5 years |
| Customer Service | https://capitalpad.com/contact/ |
| Mobile App Availability | Mobile-friendly, but desktop is preferred |
Overview:
Privately-held business acquisitions have historically been one of the hardest asset classes for individual investors to access. Deal flow was limited to ultra-high-net-worth family offices and select university alumni networks (Harvard, Stanford), and minimum check sizes often started at $250k or more.
But I’ve been seeing this change the last couple of years. The broader “entrepreneurship through acquisition” (ETA) movement has opened up significantly, with self-funded search, search funds, independent sponsors, and micro private equity all seeing a surge of investor interest. Niche private equity platforms like CapitalPad have emerged to meet that demand.
CapitalPad is a deal-by-deal investment platform focused on the lower middle market. It connects accredited investors with acquisition entrepreneurs buying established, privately-held businesses with deal sizes typically up to $20M. Rather than committing capital to a blind fund, investors can review individual deals and choose where to allocate. That alone makes it pretty unique.
What Does CapitalPad Offer?
CapitalPad connects accredited investors with acquisition entrepreneurs who are purchasing established, privately-held companies. In each deal, a sponsor is acquiring a historically profitable business with the goal of operating it, improving it, and eventually exiting at a higher valuation or distributing cash flows along the way.
If you’re familiar with private equity, the model will feel recognizable. But there are some key differences:
- Investors review and invest in each deal individually instead of committing to a blind fund.
- Deal sizes are typically from $5M to $20M, which means lower purchase multiples and lower entry points than traditional PE.
- The acquirer often steps directly into an operational role post-acquisition, sometimes even as CEO.
- There is not an ongoing management fee. CapitalPad takes the usual 20% carry, but only has a one-time 1.5% closing fee (for admin expenses) instead of the usual annual 2%.
For investors, the appeal is straightforward: access to an asset class that has historically been difficult to get into, at lower entry points, without fund-level commitment.
What types of deals does the platform offer?
CapitalPad isn’t limited to one industry. The deals span a wide range of sectors, including:
- Home services and skilled trades (HVAC, plumbing, remodeling)
- Healthcare and medical services
- Manufacturing
- Distribution and logistics
- Business services
- And others
What all the deals have in common is the profile: established companies with real revenue, real customers, and a track record of profitability. These aren’t startups or growth capital bets. They’re operating businesses that have been around for years, sometimes decades.
CapitalPad tends to focus on industries where there’s a proven business model and consistent demand, rather than tech-heavy or venture-style plays.
What sort of returns are available?
Due to securities laws, CapitalPad does not publicly advertise its own returns. But the broader asset class has well-documented performance data.
The most cited sources is the annual Stanford Search Fund Study and the Citrin Cooperman Independent Sponsor Report. As of the 2024 Stanford study, the aggregate search fund IRR sits at 35.1%. That’s a compelling number, but it’s worth understanding why these returns tend to be higher than traditional PE:
- Acquisition multiples are lower. These businesses typically trade at 3-5x EBITDA, compared to 8-12x or higher for larger PE deals. Lower entry price means more room for upside, and less growth needed to generate strong returns.
- Operational improvements have outsized impact. Small changes to pricing, processes, or sales at a $5M-$20M company can meaningfully move the needle on profitability.
- Multiple expansion at exit. A business acquired at 4x EBITDA can often be sold at 6-8x if it’s been professionalized and scaled, especially through a rollup strategy.
That said, not every deal is a home run. The Stanford study includes failures too, and diversification across multiple deals is important. These are illiquid, private investments with real risk.
Why do investors use CapitalPad?
The short answer is access and simplicity.
Before platforms like CapitalPad, getting into these deals meant knowing the right people, sitting through dozens of one-on-one meetings with sponsors, managing your own legal paperwork, and writing $250k+ checks per deal.
CapitalPad consolidates all of that. Investors get a single dashboard where they can browse available deals, review financials, watch sponsor presentations, read full deal memos, and make allocation requests. All investors are pooled into one SPV per deal, which is what allows the minimum check size to be as low as $25k.
It’s still not as easy as buying a stock. But for an asset class that used to require a personal network and deep pockets just to see deal flow, it’s a significant step forward.
Why do deal sponsors use CapitalPad?
Raising capital to close these deals can be a slog.
Sponsors frequently reach out to hundreds of potential investors, sit through dozens of meetings, and deal with countless unique requirements and funding schedules.
CapitalPad simplifies the process by rolling all investors into a single SPV and hosting all deal materials on the platform behind an NDA. For sponsors, that means less time fundraising and more time focused on closing and operating the business.
For investors, this matters too. The platform doesn’t accept every deal that applies, sponsors and their deals go through a vetting process before being listed. That selectivity tends to mean higher-quality deal flow for everyone on the platform.
How do investors evaluate deals?
Each deal on CapitalPad has its own deal room where investors can review everything they need to make a decision. Because deals go through a strict vetting/curation process before being listed, there are usually only one or two available at any given time.
Inside a deal room, investors have access to:
- A short teaser video from the sponsor (2-3 minutes)
- Company description and sponsor background
- Historical and projected financials
- Distribution objectives
- Customer and supplier concentration data
- Assets being purchased
- Sources and uses table
- Deal structure and purchase multiple
- A full deal memo
- Due diligence documents (P&Ls, tax returns, agreements, etc.)
- An open investor call with the sponsor, or a recording if the call already happened
It’s a level of transparency you don’t typically get in private deals, especially at this check size. Everything is in one place, behind an NDA, and standardized across deals so investors can compare opportunities consistently.
What happens post-acquisition?
Once a deal closes, the sponsor takes over operations and investors become limited partners (LPs) in the deal’s SPV. From there, investors receive quarterly updates from the sponsor on how the business is performing.
On the operations side, sponsors typically attempt to create value in a few ways:
- Maintaining and protecting the existing profitable operations of the business
- Growing revenue through new customers, services, or markets
- Improving margins by reducing costs or increasing operational efficiency
- Acquiring additional companies and combining them for synergies or to sell the larger combined entity at a higher multiple (known as a rollup strategy)
The approach varies deal by deal.
How do Investors Realize Returns?
Returns typically come from one or more of the following:
- Profit distributions from the ongoing operations of the business
- Exit at a higher valuation when the sponsor sells the company, usually targeting a 4-5 year hold period
- Debt pay-down, which increases equity value over time as the business pays off acquisition debt
- Multiple expansion, often through a rollup strategy where smaller companies acquired at 3-5x EBITDA are combined and aim to be sold to larger buyers willing to pay 6-10x
The deal memo outlines the sponsor’s target return profile and timeline before you invest.
One important note: not every deal will be a winner. The failure rate in this asset class is meaningfully lower than venture capital, but losses do happen. Diversifying across multiple deals and maintaining liquidity in other parts of your portfolio is important, since these investments are illiquid until there’s a distribution or exit event.
Do I Need To Be Accredited
Yes. CapitalPad is only for accredited investors.
Are There Any Fees?
Yes, they’re similar in nature, but structured differently than a traditional PE fund.
Most private equity funds operate under a “2 and 20” model: a 2% annual management fee plus 20% of the profits. CapitalPad doesn’t charge a recurring management fee. Instead, the fee structure looks like this:
- 20% carry on profits, but only after investors have received their initial capital back first
- One-time 1.5% closing fee to cover administrative costs at the time of closing (not recurring)
The big difference is the absence of an ongoing management fee. In a traditional fund, that 2% compounds year after year regardless of performance. CapitalPad’s model means they only make meaningful money when investors do.
Summary
CapitalPad isn’t for everyone. You need to be accredited, comfortable with illiquidity, and willing to hold for 4-5 years. If that’s a dealbreaker, this isn’t the right fit.
But if you’re looking for passive exposure to established, privately-held businesses at lower entry multiples than traditional PE, and you want to invest deal-by-deal instead of locking capital into a blind fund, there aren’t many platforms that offer what CapitalPad does.
The fees are fair, the deal flow is vetted, and the asset class has a strong historical track record. It’s not as simple as buying a stock (far from it), but for accredited investors who want access to lower middle market M&A, CapitalPad is one of the most straightforward ways to get in.
