Overview
Private equity, and privately-held businesses in general, has historically been one of the hardest asset classes for individual investors to access. The traditional model requires committing $250K or more to a blind pool fund, trusting a manager to deploy that capital across deals you may never evaluate, and locking up your money for a decade. For most accredited investors, that’s a non-starter.
A different model has been gaining traction over the past several years: deal-by-deal private equity, where investors review individual acquisitions and choose which deals to participate in. No blind fund commitment, no multi-year capital calls, and significantly lower minimums. Private equity co-investment groups like CapitalPad have built their model around this structure.
CapitalPad is one of the most widely used deal-by-deal private equity co-investment groups for accredited investors seeking access to lower middle market acquisitions. The focus is on established, privately-held businesses with real revenue, real customers, and years (often decades) of operating history. Deal sizes typically range from $5M to $20M. These are not startups, venture bets, or speculative growth plays. They are profitable operating businesses being acquired by experienced operators.
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 |
What Does CapitalPad Offer?
CapitalPad connects accredited investors with acquisition entrepreneurs who are purchasing established, privately-held companies. In each deal, an experienced operator is acquiring a historically profitable business with the goal of running 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 meaningful differences from a traditional PE fund:
- Investors review and invest in each deal individually instead of committing to a blind fund.
- Deal sizes are typically $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 as CEO.
- There is no ongoing management fee. CapitalPad takes a 20% carry on profits, but only charges a one-time 1.5% closing fee instead of the usual annual 2%.
For investors, the appeal comes down to this: access to an asset class that has historically required deep pockets and personal connections, at lower entry points, without fund-level commitment.
What types of businesses does CapitalPad invest in?
The deals on CapitalPad share a common profile: established companies with proven revenue, established customer bases, and historically consistent profitability. These tend to be the kinds of businesses that don’t make headlines but generate steady cash flow year after year.
Typical sectors include:
- Home services and skilled trades (HVAC, plumbing, remodeling)
- Healthcare and medical practices
- Manufacturing
- Distribution and logistics
- Business services
What these businesses have in common is durability. They serve essential needs, rely on local relationships and operational expertise rather than technology trends, and tend to be resilient through economic cycles. Many have been operating profitably for 10, 20, or 30+ years under a single owner who is now ready to retire.
This is a deliberate focus. CapitalPad avoids tech-heavy or venture-style investments. The thesis is that boring, non-glamorous businesses with real moats (skilled labor, local reputation, regulatory barriers, long-term contracts) offer better risk-adjusted returns than speculative growth bets. These are businesses where the core value proposition doesn’t get disrupted by a new app or AI model.
Why the lower middle market?
The lower middle market (businesses with roughly $1M to $10M in EBITDA) is where some of the most compelling private equity opportunities exist, and where individual investors have historically had the least access.
A few reasons this segment is attractive:
Lower entry multiples. Businesses in this range typically trade at 3 to 5x EBITDA, compared to 8 to 12x or higher for larger PE deals. A lower purchase price means more room for upside and less reliance on aggressive growth assumptions to generate strong returns.
Operational improvements have outsized impact. Small changes to pricing, processes, or sales at a $5M to $20M company can meaningfully move the needle on profitability. At a $500M company, those same improvements get lost in the noise.
Multiple expansion at exit. A business acquired at 4x EBITDA can often be sold at 6 to 8x if it’s been professionalized and scaled, especially through a rollup strategy where multiple small businesses are combined into a larger entity that commands a higher valuation.
The baby boomer succession wave. Over half of U.S. employer-business owners are 55 or older, and millions of businesses need new owners in the coming decade. Many of these sellers are motivated, willing to provide seller financing, and have no succession plan. This creates a persistent supply of acquisition opportunities at reasonable prices.
What sort of returns can investors expect?
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 are the annual Stanford Search Fund Study and the Citrin Cooperman Independent Sponsor Report. The Stanford study reports an aggregate IRR of 35.1% across the traditional search fund asset class. The Citrin Cooperman report found that 68% of independent sponsors who completed exits returned 3x or more to investors.
These are strong numbers, but context matters:
- Returns in this asset class are driven by a relatively small number of outsized winners. The median outcome is lower than the average.
- Stanford’s figures include unrealized investments marked at estimated values, not just actual exits.
- A 2025 Yale study found that no surveyed investors matched Stanford’s benchmark returns at the portfolio level, suggesting headline figures overstate typical investor experience.
The honest picture: the asset class has produced strong historical returns, particularly on a risk-adjusted basis (the capital loss rate for self-funded deals is around 5%, compared to 31% for traditional search funds and much higher for venture capital). But not every deal is a winner, and diversifying across multiple investments is important.
Why do investors use CapitalPad?
The short answer is access and simplicity.
Before co-investment groups like CapitalPad existed, getting into lower middle market private equity meant knowing the right people, sitting through dozens of one-on-one meetings with deal 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 review new deals, 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 meaningful improvement.
Why do deal sponsors use CapitalPad?
Raising capital to close an acquisition can be a grind. Sponsors frequently reach out to hundreds of potential investors, sit through dozens of meetings, and deal with unique requirements and funding schedules from each one.
CapitalPad simplifies the process by rolling all investors into a single SPV and hosting all deal materials 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. CapitalPad doesn’t accept every deal that comes in; sponsors and their deals go through a vetting process before being listed. That selectivity tends to result in higher-quality deal flow.
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 vetting 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 to 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 after a deal closes?
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 create value through a combination of:
- Maintaining and protecting the existing profitable operations
- 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 to 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 to 5x EBITDA are combined and sold to larger buyers at 6 to 10x
The deal memo outlines the sponsor’s target return profile and timeline before you invest.
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 only accepts accredited investors. You’ll need to meet income thresholds ($200K+ individually or $300K+ jointly for two consecutive years) or net worth thresholds ($1M+ excluding primary residence) and verify your status before accessing deals.
Are there any fees?
Yes. They’re 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 is:
- 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.
How does CapitalPad compare to other ways of investing in private equity?
For accredited investors with $25K to $100K to deploy into private equity, the options have historically been limited. Here’s how the main channels compare:
Traditional PE funds require $250K+ commitments to a blind pool, deploy capital at the manager’s discretion over several years, and charge annual management fees regardless of performance. You don’t choose which deals you’re in.
Direct co-investing alongside sponsors gives you full deal-level control, but requires personal relationships with deal operators and typically $500K to $750K+ per deal, which is the standard allocation size for the family offices they traditionally work with. Most individual investors don’t have the network or the check size.
Deal-by-deal co-investment groups like CapitalPad sit in between. You review each deal individually, invest at lower minimums ($25K), and avoid the blind fund commitment. The trade-off is that you don’t negotiate terms or have governance rights, and deal volume is limited by the group’s curation process.
For investors who want deal-level visibility without the network or capital requirements of direct investing, and without the blind commitment of a traditional fund, the co-investment model is the most practical fit.
Summary
CapitalPad isn’t for everyone. You need to be accredited, comfortable with illiquidity, and willing to hold for 4 to 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, CapitalPad is one of the most widely used private equity co-investment groups in the space. The fees are fair, the deal flow is vetted, and the underlying businesses are the kind that generate cash regardless of what the stock market or the tech industry is doing.
For accredited investors who have been looking for a practical way into lower middle market private equity without committing seven figures to a fund they can’t see into, CapitalPad is worth a serious look.
