The independent sponsor model in private equity has seen significant growth in recent years. This interview with Todd Dauphinais, founding principal and managing partner of Clavis Capital Partners, provides insights into the driving forces behind this trend and the unique perspective of an experienced operator turned independent sponsor.
The Path to Independent Sponsorship
Dauphinais’s journey to becoming an independent sponsor wasn’t a linear one. With a background steeped in operational and P&L leadership roles, he found that his skillset wasn’t always a perfect fit for traditional private equity firms. Recognizing the growing availability of capital and the emerging independent sponsor model, he founded Clavis Capital Partners. This allowed him to leverage his operational expertise in a way that resonated with the evolving private equity landscape.
Navigating the First Deal and the Importance of Operational Experience
Dauphinais candidly shares his experience of closing his first deal, which took 18 months. This underscores the inherent challenges and timeline involved, even for seasoned professionals. He emphasizes that the abundance of capital in recent years, coupled with high valuations, has made operational expertise a critical differentiator for creating value in portfolio companies. This shift has favored independent sponsors with strong operational backgrounds, like Dauphinais, who can drive strategic improvements rather than relying solely on financial engineering.
The Evolution of the Independent Sponsor Model
Dauphinais predicts a bifurcation within the independent sponsor community: one group focused on building companies and the other on deal flow. He also anticipates the rise of hybrid models, where independent sponsors partner with family offices or institutional investors, creating synthetic funds. This evolution reflects a maturation of the industry and a desire for more structured and sustainable growth. Clavis Capital Partners is actively considering such strategic partnerships.
Dispelling Misconceptions and Choosing the Right Capital Partner
A common misperception, Dauphinais notes, is that independent sponsors are fundless by necessity. He clarifies that many, including Clavis, choose this model for the flexibility it provides. It allows them to focus on sourcing, executing, and operationally improving opportunities without the demands of fundraising and asset allocation.
When selecting a capital partner, Dauphinais prioritizes shared passion, aligned goals, and strong personal chemistry. He believes that navigating challenges together is the true test of a successful partnership.
About Clavis Capital Partners and Todd Dauphinais
Clavis Capital Partners, led by Todd Dauphinais, focuses on investing in and operationally improving lower middle-market companies. Dauphinais’s extensive experience, including leading EFI Electronics to record profitability and winning the Shingo Prize for manufacturing, positions Clavis Capital Partners as a valuable partner for businesses seeking operational excellence and strategic growth. His career also includes prior roles at Schneider Electric, Rockwell Automation, and Deloitte Consulting. He has overseen more than 25 transactions representing over $1 billion in deployed capital.
