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Lena

Insider Insights: Harris Hafeez’s Journey from Entrepreneur to Private Equity Pro

An Interview with Harris Hafeez, Managing Partner and Member of Advanced Physical Medicine & Rehabilitation

If you’re an entrepreneur looking to make a big exit, Harris Hafeez is a guy you should listen to. He’s been there, done that, and has a wealth of insights to share. Harris is the Managing Partner and Member of Advanced Physical Medicine & Rehabilitation (Advanced PMR), a company that offers outpatient physical therapy throughout central New Jersey. He joined the company in 2015 and has since seen the growth of the company from two clinics to seven clinics. In 2018, Harris and his team successfully exited the company through a private equity exit.

For Harris, the major impact of the exit was the access to capital and the ability to pick and choose where they wanted to expand. But, he admits that one downside was the time it took to get deals done.

“When you’re dealing with larger corporations, there are many, many moving parts,” he told me in a recent Zoom interview. “And a lot of those parts have to go through a diligence process.”

As an entrepreneur, he has always strived to close as many deals as possible; however, he understands the necessity of doing quality deals over numerous ones.

His post-exit experience has taught him the importance of due diligence and understanding all aspects of a deal before moving forward.

“It shocked me that many deals that you think look great, at least on the surface, and you just peel one layer of the onion, and you find very quickly that there’s a lot of things that you don’t want to get involved in,” he said.

Since exiting Advanced PMR, Harris has been a buyer of smaller entities, rolling them into his current entity. He has also opened up new offices in New York, where he saw opportunities.

As a seller, Harris has a wealth of advice for entrepreneurs who are looking to make an exit.

“My main piece of advice to anyone looking to partner with a PE firm is – if you’re comfortable with who you want to work with on a day-to-day basis – [whether] the valuation makes sense,” he said. “Don’t try to fight for bigger numbers, and don’t try holding things off for the next year or even the following year. Because you don’t know what’s going to happen.”

Harris argues that to know a company’s value; you must understand more than just the financials. He believes it is crucial to know the company culture, who works there and what services they offer.

“I want to talk to the people behind the screen that are in the weeds dealing with the consumers they are dealing with. The services that are being offered and learning more about what the company offers and the company culture as a whole,” he said.

In a nutshell, Harris Hafeez’s journey from entrepreneur to private equity pro is evidence that due diligence and understanding the company culture are key to a successful exit. He has learned that it’s OK to take the time to do quality deals rather than numerous deals, and he encourages others to focus on more than just valuation and revenue when evaluating a potential exit.

What do you think? Do you share Harris’ views? Share your thoughts with us!

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Jan. 2023

Intellectual Property as Collateral: How to Do Business Development in This Booming Industry

An Interview with Joseph Rossi, Assistant Vice President for IP Lending Solutions at Aon

In today’s business world, intangible assets are becoming increasingly important. As a result, more and more companies are looking for ways to finance their businesses by leveraging their intellectual property (IP). I sat down with Joseph Rossi, Assistant Vice President for IP Lending Solutions at Aon, to learn more about this burgeoning field and how he conducts business development for what he believes to be the next big thing in lending.

IP-backed lending is a type of collateralized lending that uses a company’s intellectual property as security for a loan. This can include patents, copyrights, trademarks, and trade secrets. The intellectual property is appraised and then used as collateral for the loan, much like a home or car would be used.

IP-backed loans can be used for various purposes, such as working capital, business expansion, or even acquisition financing. And because the collateral is the IP itself, the loan can be structured flexibly and tailored to the borrower’s needs. This type of financing can be particularly helpful for high-growth companies that may not yet be profitable but have strong IP portfolios.

“We have put together a structure in which IP is treated more like a traditional physical asset that is being collateralized for a debt facility and backstopping its value through an insurance wrap,” said Rossi.

“Our valuation process coupled with the credit enhancement often gives companies the ability to access higher capital amounts, which is another form of non-dilution beyond the minimal to no warrant dilution we typically see; it extends the runway for them to not have to raise capital for a while or to skip financing rounds altogether and fully commercialize.”

Three Essential Business Development Tips for Newbies

Rossi joined Aon last year after being a financial advisor at Merrill Lynch Wealth Management for more than four years. Business development for IP-backed lending was uncharted territory for him when he started at Aon. But he says the following three tips have been instrumental in his success so far:

1. Be Truthful

When you’re just starting to get your feet wet in this industry, it’s critical to be honest about your knowledge and experience level, Rossi said. Refrain from acting like you know everything because chances are the people you’re talking to have been doing this for a lot longer than you have.

“I know that if I’m in a situation where I’m not sure what the answer is, or I’m not sure what to do, I know that I’m going to be truthful in that situation,” he said. “The worst-case scenario is me basically saying, ‘Look, I don’t know what the answer to that question is. And, you know, I’ll run it down for you.'”

2. Meet as Many People as Possible

In any new industry, Rossi says it’s imperative to meet as many people as possible and get a lay of the land. This will not only help you learn more about the industry, but it will also help you build relationships with key players. And when it comes to business development, relationships are everything.

“In the beginning, I think you have to turn over every rock,” he said. “You can’t let anything fall through the cracks. You have to try everything until you get to the point where you have the luxury of determining what’s is a good use of your time.”

3. Take Notes and Read a Lot

When Rossi started in this industry, he took notes on everything and read as much as possible. He still does to this day. And while it may seem like a tedious task, it’s helped him immensely in his career.

“I think note-taking is huge,” he said. “And I think that reading is huge. I always have a pen in my hand. I always have a notepad. In my free time, I’m always reading, whether it be a business book, a sales book, psychology book or what’s going on in the market.”

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Nov. 2022

4 Ways Business Development Can Help M&A Professionals and Service Providers Survive a Recession

 

If you graduated before 2010, chances are you remember the Great Recession. Chris invested 3 years and hundreds of thousands of dollars into law school and graduated in 2008 at the top of his class with a job offer at one of the biggest firms in the city. But just months after starting his job as a junior associate, he, along with nearly everyone else in his class, was laid off. With little work experience and the competition of 2009 and 2010 grads, Chris couldn’t find another position. Melanie got her MBA in 2009 with a job offer to work at one of the largest investment banks in the country. But the offer came with a condition – that she start working in 2011. Again, with over a hundred thousand dollars invested in business school, it wasn’t the ROI she was expecting.

The majority of reputable financial news sources agree: a global recession is coming. While the world experienced a recession in the beginning of the pandemic, it only lasted about 2 months. The Great Recession of 2007-2009 was the last significant global recession, which means if you graduated after 2010 you probably haven’t truly experienced what it means to live (and hopefully work) through a recession. Unfortunately, if history teaches us anything, an impending recession will likely bring with it a decline in M&A activity, deal performance, lay-offs and fewer new employment opportunities, as well as budget cuts for L&D and business development activities. 

If your palms are starting to sweat, take a deep breath. You can survive a recession. But in order to do so, you must recognize that business development is now more important than ever. Business development can:

  1. Increase Your Revenue: The primary reason that people do business development is that it usually translates into revenue at some point. During a recession, where deal flow is slower, people with a bigger book of business and better relationships are more likely to continue to stay afloat, close deals, and/or be the go-to person when a deal is percolating. And while revenue might slow down during a recession, business development is all about creating long-term value. When the recession ends, those who stayed the course and continued to focus on business development efforts will reap the benefits.
  2. Provide You With Leverage/Last Out: Aside from direct financial gain, another important reason to ramp up your business development efforts now is that it will give you leverage at your current organization. If your company ends up laying people off and you have your own book of business and/or a significant network, you likely won’t be the first to go. You’ll also increase your optionality and put yourself in a good negotiating position because you will be more desirable to other companies and firms.
  3. Facilitate New Employment Options: If you need or want to find another job, having a network makes it much easier. Referrals from people who are familiar with your work ethic and experience can go a long way.
  4. Create New Ventures: When the pandemic hit, I was in the process of expanding Opus Connect to London. With the travel lockdown and budget cuts, I had to temporarily shutter my dreams of expanding Opus to another country. But as a result, I was able to focus on other ventures that still addressed the needs of my customers, but that did so in a virtual format and at a lower price point. Having a wide network was what enabled me to easily create and sell those new products.

Hopefully I’ve convinced you that business development can play a key role in helping you and your organization survive the storm that is approaching. If you are looking for tips on how to do business development, consider attending one of my upcoming seminars on Mastering the Art of Business Development on November 9th or 10th. During this live workshop we will:

  • Explore tips and tools
  • Learn how to create a personal business development plan
  • Take your career and your life to the next level

Register here: November 9; November 10

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
October 2022

Three Tips for Being a Successful M&A Advisor from Sharon Heaton, CEO of sbLiftOff

 

In the male-dominated world of M&A, Sharon Heaton is a force to be reckoned with. The CEO of sbLiftOff, a national M&A advisory firm, she has over 30 years of experience in the industry. She has closed deals worth millions of dollars and advised some of the biggest names in business.

But Sharon is not your typical M&A advisor. For one thing, she’s a woman in a male-dominated industry. For another, she’s based in Herndon, VA – far from the major financial centers of New York and Chicago.

In a recent interview, I asked her what it takes to be a successful M&A advisor. Here are her top three tips:

1. Be Empathetic

Sharon says that one of the most important qualities for an M&A advisor is empathy. “By putting yourself into the other party’s shoes, you can better predict how things are going to happen because you’re looking at it from their perspective,” she said, explaining that while buyers and sellers often have different objectives, both parties want to feel like they’ve gotten the best possible deal.

She adds that certain sellers, like founding owners, are often reluctant to give up control of their companies and may need some hand-holding through the process. “Founder owners are a special unique breed of people,” she said. “They’ve been working on their company as long as they’ve been raising their children. And having an objective view of their company is hard.”

2. Be Persistent

M&A is a complex process, and Sharon says that one of the most critical qualities for an advisor is persistence. “We think persistence makes a difference,” she said, adding that M&A advisors must be able to pivot when things don’t go as planned.

She recalls a recent deal that fell through twice due to financing issues and capital market conditions. But Sharon and her team kept working on it and eventually got the deal done.

“The third time was the charm,” she said.

“We came up with yet another buyer, and we did it within three days of the second deal falling apart. We were able to present it to the seller. The buyer and the seller worked extremely well together and were able to close that transaction. Would everybody have been happy if the first deal had worked out? Absolutely. But sometimes, it doesn’t work that way. Sometimes you just need to be persistent. Stay at it. And you’ll eventually get over the line,” she added.

3. Think Outside the Box

Sharon says that another important quality for M&A advisors is creativity. She provided an example of a company that was installing ATMs in walls, but buyers were hesitant to invest because they considered ATMs a declining industry.

However, Sharon and her team thought outside the box and rebranded the company as the expert in “installing technology in static places.”

“They happened to be putting ATMs in the wall, but no reason could not be putting computer monitors on the wall,” she said. “When you go to New York, and you see [a screen that says]This bus is going to be arriving in three minutes. It’s the same thing. When you go to a parking lot, and you serve an automated way of getting in and out of the lot, it’s the same thing.”

She added that this changed “the perception dramatically by buyers. They said, Oh, I understand. That’s a growth industry. So we went from trying to sell what was being perceived as a buggy whip and turn that into something that was being perceived as a growth industry.”

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Oct. 2022

How T.J. Johnson’s Business Development Strategy Helped His Insurance Company Post-COVID

An interview with T.J. Johnson, Client Executive for Business Insurance and Risk Solutions at Marsh & McLennan Agency

 

When T.J. Johnson started working in the insurance industry 15 years ago, he never imagined himself in the business for so long. But now, he says he loves it and has learned a lot throughout the years.

“What I liked the most about this business is working with business leaders, top decision-makers, and business owners and helping them protect their business and their baby,” Johnson told me in a recent Zoom interview.

Johnson is the Client Executive for Business Insurance and Risk Solutions at Marsh & McLennan Agency and focuses on property, casualty, and business insurance for the middle market in Southern California.

When the Covid-19 pandemic started, business development (BD) experts worried about what would happen to their clients and how they could keep their businesses afloat. BD had long relied on in-person events, face-to-face networking, and business lunches and dinners to build relationships. But with the pandemic came a new set of rules: no more shaking hands, no more business lunches, and no more business travel.

But Covid-19 didn’t turn out to be as bad as many feared for Johnson and his team. They didn’t only manage to keep their clients; they actually grew their business. To Johnson, Covid-19 served as a time of reflection and change – both personally and professionally. Before the pandemic, he said he spent a lot of time on the road in airplanes and hotels, coordinating meetings and trying to make the most of it. But now, he says he is “working smarter, not harder.”

“I’m able to have ten meetings a day instead of those five, and they’re very productive. And that boosted business big time for me,” he says.

“Insurance is the last thing people think about; It’s not sexy,” he said, adding that this often means an additional challenge for BD professionals working in the industry. The key to success, he says, is to be passionate about the industry and have a genuine desire to help people.

He says one also has to think outside the box when creating opportunities to meet new people. For example, he referred to a recent event he hosted for M&A advisors and investment bankers in Porsches, sipping cocktails and wine with appetizers being served.

“It was a big success,” he said. “It was a big hit because it was different. It wasn’t your traditional, Happy Hour meet at a bar trying to network. There was no agenda. We weren’t talking about insurance. We weren’t talking about banking; we weren’t talking. None of that. It was just, let’s connect, let’s have fun.”

Being focused on building long-term relationships has always been a cornerstone of Johnson’s BD strategy.

“I’ve seen way more success and trying to help others out, where it comes back in tenfold for me,” he says. “You can’t go in there selfishly thinking about yourself when you’re networking and doing business development; you’ve got to build quality relationships of trust.”

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Oct. 2022

What We Can Learn from the Struggles of Digitally Native Brands

An interview with Michael Lipkin, CEO of Assembled Brands

 

There’s no doubt that digitally native brands have changed the retail landscape. But as they’ve grown, we’ve seen some common struggles emerge – namely around profitability. In this interview, Michael Lipkin, CEO of Assembled Brands, a Los Angeles-based company that provides working capital and growth capital to early-stage consumer brands, shares some insights into why so many digitally native brands struggle.

1) Know Your Customer:

According to Lipkin, one of the biggest issues is that these companies often don’t have a clear understanding of their customer or how to reach them effectively. As a result, many end up spending endlessly on marketing without seeing a return.

“So many people or companies that we see will spend endlessly trying to attract a customer,” Lipkin says. “But if that channel isn’t efficient, you have to know to cut bait.”

Lipkin says understanding a customer’s lifetime value (LTV) as well as return on ad spend (ROAS), is critical to ensure marketing efforts are focused on the channels that will actually deliver results.

2) Metrics Matter:

Another significant issue is that these companies often don’t have a clear understanding of their key metrics. Without this knowledge, making strategic decisions around marketing and growth is difficult.

“If you’re not profitable, at the end of the day, you’re just going to have to be in an endless loop of raising more equity, suffering dilution, and trying to raise more debt,” Lipkin says. These metrics range from click-through rates to brand mentions on social media platforms, and can tell how effectively your marketing efforts are leading users to take action that generates value for the company.

3) Go Omni-Channel:

Finally, Lipkin notes that many digitally native brands have succeeded by branching out into the omnichannel world. This means, for example, selling not just through their own website but also through wholesale partners and retail stores.

“Direct-to-consumer is a little bit of a misnomer in that we see a lot of success in digitally native brands branching out to become omni-channel,” Lipkin says, explaining that this gives them the ability to reach more customers and ultimately drive more sales.

4) Be Innovative:

Finally, Lipkin says that it’s essential for these companies to be constantly innovating and differentiating themselves from the competition. This means not only coming up with new products, but also new ways to solve customer problems. For example, Lipkin referred to a company that produces towels that are resistant to sand. This company quickly rose to popularity because it solved a problem many people experience when going to the beach.

“If you can differentiate a product to solve a differentiated problem, I think you’ll just stand out from the crowd,” Lipkin says.

5) Focus on the Bottom Line:

Finally, Lipkin says that it’s vital for these companies to focus on profitability, not just growth. He notes that many brands get caught up in trying to grow their top line without thinking about the bottom line. This can be a recipe for disaster, as we’ve witnessed with public companies like Allbirds and Warby Parker, which have seen their stock prices drop due to a lack of profitability.

“So many VC-backed companies forget about becoming profitable that it really, in the end, hurts them,” Lipkin says.

In brief, Michael Lipkin believes that in order for a digitally native brand to be successful, it must focus on five key areas: knowing their customer, metrics, going omni-channel, being innovative, and profitability. By following these tips, brands can avoid some of the common pitfalls and set themselves up for long-term success.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Oct. 2022

Edge Capital Lending: Consider ABL Disrupted

An interview with Lucy Csizmas, Director of Business Development at Edge Capital Lending, LLC.

 

When Context Business Lending, LLC, decided to rebrand as Edge Capital Lending, LLC, in September, they had one goal in mind: to be an even more customer-focused, flexible lender. And with Meredith Carter, a female President/CEO at the helm, they are well on their way to achieving that goal.

Edge Capital Lending is a non-bank, family office backed lower middle-market direct lender that provides flexible financing solutions ($5-$50 million) to companies with annual revenues of $10-$250 million. Founded in 2013 in Bala Cynwyd, Pennsylvania, Edge Capital currently has employees in more than a dozen states across the country.

As Director of Business Development, Lucy Csizmas, explains that Edge Capital is willing to work with businesses in industries traditionally considered “out of favor”, – such as the cannabis (CBD), topical oils/creams, E-Commerce, firearms, energy, alcohol and other industries along with traditional manufacturers, distributors, service businesses, online retailers and others. This willingness to take a holistic view of each business’ challenges and turn them into opportunities is what sets Edge apart from other lenders.

Lucy states the name change reflects the company’s commitment to being an ABL Disruptive Lender, being more nimble and willing to think outside of the box in order to provide their borrowers an optimal financing structure.

“We are always open-minded. I believe that is the common thread,” Lucy stated. “We are willing to look at any industry and if we can rationalize and understand it, our credit team is willing to take the time to provide appropriate customer specific asset backed structures. “It’s refreshing to be a part of such a creative and collaborative team!”

In California, where the CBD topical healing solutions market is booming, Edge is positioned to become a leader in this industry. “The companies currently lending into this industry are very expensive,” said Lucy.” As we are comfortable lending into the industry after significant due diligence, we can provide a more cost effective solution to this and other out of favor industries.”

And with female CEO, Meredith Carter, at the helm, Edge is poised to continue its forward-thinking, collaborative approach to lending.

“It’s refreshing for me as a female, to have a female CEO that I report to directly and a very flat organizational structure” said Lucy. “There shouldn’t be a distinction between female or male, but Meredith Carter does bring different ideas and practices to the table. We are very open in our discussions, and it’s an extremely collaborative team with one goal in mind – how to be an optimal financial partner to companies in order to help them create Edge within their industry .”

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Oct. 2022

Donika Schnell: Four Tips for Success for Single Mothers

Donika Schnell, Managing Director at Greystone & Co for healthcare, provides four tips for success for single mothers.

 

Donika Schnell is a mother of three and a successful businesswoman. She has been divorced since her children were young, but she has never let that stop her from achieving her goals. She is the daughter of Albanian parents who fled the communist regime in their homeland in the early 1950s. Donika was born in America and raised in a traditional Albanian household for Chicago.

She is now the Managing Director at Greystone & Co for healthcare. She provides meaningful, complete debt solutions to skilled nursing and seniors housing, including bridge loans, permanent HUD or Agency financing, mezzanine, and other creative debt products.

Donika is a strong advocate for single mothers. She knows how difficult it can be to raise children on your own, but she also knows it is possible to succeed. She believes there are four things that all single mothers need to do to be successful: get an education, be driven and passionate, be coachable, and form a personal advisory group.

Get an Education:

Donika knows that getting an education is the key to success for any single mother. She has a degree in accounting and communications and has used her education to climb the corporate ladder. As a firm believer in the importance of education, she has made sure that her children have had the opportunity to attend private school to increase their chances of success and also because the private school community provided a consistent, supportive environment for them surrounded by loving teachers and administrators .

“When I was little,” she said, “my father constantly talked about how lucky we are to live in a country with the freedoms we have, that if you have a dream, you can make it happen. And you can do that in this country. So, he was committed to an education for me and my sister.”

Be Driven and Passionate:

Donika says she is a very driven and passionate person. When she sets her mind to something, she goes after it with everything she has. This has served her well in her career in healthcare, where she has succeeded in a male-dominated industry.

“I like to think I have a strong constitution, that I can do almost anything and everything,” she said, explaining that despite the challenges of being a single mother and coming from an immigrant family, she has never let anything stand in her way.

“I never let any of those hold me back…I always behaved as an equal to anybody at the table with me,” she added.

Be Coachable:

One thing that helped Donika succeed is her willingness to be coached by others. When she started her career, she had a mentor who taught her the ropes and showed her how to be successful. Even now, she continues to seek advice from her peers.

“I find myself in situations where I’ve been around really smart people that I can learn from, and strive to be more like them, and they were all kind. They treated everybody the same way with respect.  I’ve been so very fortunate to have amazing mentors in my life” she said.

Form a Personal Advisory Group:

Another piece of advice Donika has for single mothers is to form a personal advisory group. This group of people can offer you support, advice, and help when you need it. For Donika, this group includes her family, friends, and colleagues, including both women and men.

“Build a personal advisory group if you need support or you need advice,” she said. “There are others out there, and they don’t have to be women to support women. I’ve had fantastic male mentors. Men who have helped me be better by either leading or giving me advice.”

Donika would like to add that for any single mother, your future is yours to make.   Stay focused on your children and yourself.   She married a wonderful man 8 years after her divorce who is supportive and an equal partner in life.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Sept 2022

The Woman Behind Anagenesis Capital Partners: A Profile of Melanie Brensinger

An interview with Melanie Brensinger, Co-founder and Managing Partner of Anagenesis Capital Partners

 

Melanie Brensinger is the Co-founder and Managing Partner of Anagenesis Capital Partners, a Florida-based private credit investment firm focused exclusively on the healthcare industry. Melanie has spent the past 16 years exclusively focused on investing in healthcare. She feels it is crucial to be solely focused on the healthcare industry to be able to dissect the complexities of the system and stay ahead of the trends as it is a constantly evolving sector.

Melanie has a particular interest in companies that provide delivery of quality care to patients in underserved markets, provide services to patients in their homes and preventative care. Melanie is passionate about the healthcare industry because she believes that it has the potential to make a real difference in people’s lives. She is energized by the innovation that is happening and tech enabled services being established to further enhance the reach to patients in rural markets.

“With that, I wanted to make sure that we focused really on that lower middle market segment, and we provided flexible capital to the end borrower, and then obviously, deliver really good returns for our investors,” she told Opus Connect in a recent Zoom interview.

Melanie is a firm believer in the power of private capital to make a positive impact on society. She is proud of the work that her portfolio companies are doing to improve access to care and deliver quality care to patients. In her opinion, this is what makes private capital a valuable tool for making the world a better place.

“I love going to board meetings and hearing patient success stories, whether it’s our behavioral health platform that’s providing mental care facilities/services to residents in rural Louisiana, or our podiatry platform that’s doing some really creative, innovative surgeries to allow people to walk again after significant foot deformities.  For me, that pushes me each day to focus on the underlying patient population as they are someone’s mother, father, brother or sister,” she said.

Melanie co-founded Anagenesis Capital Partners in 2015 when there were few, if any, other credit funds focused exclusively on healthcare. She saw an opportunity to fill a niche in the market and provide much-needed flexible capital to lower middle market healthcare companies. Most capital providers offer company’s capital solutions that try to force the company into their “sweat spot”.  I wanted to flip that upside down and understand what a company needs and provide a capital structure that supports the success of the business. She raised a $274 million fund, and the company has been actively deploying capital since that time.

“I can look at a business fairly quickly and understand which direction it’s going,” she said, explaining why expertise in a sector such as healthcare is so important.

“Some people might look at a company and say, wow, it has 50% EBITDA margin. I’d love to invest in this business. But anybody who knows healthcare is always very gun shy of anything that has outsized margins because if it has reimbursement exposure, that probably means there’ll be a cut along the way…Intuitively, you think high margins are always better, and in healthcare, that’s not always the case,” she added.

Melanie says that what makes her unique is the focus on partnership rather than a pure investment return perspective when it comes to working with portfolio companies. “As a founder and entrepreneur, myself, I understand the challenges of starting a business and managing it in good times and challenging times. The challenging times are where character is really displayed.”

“I’m a long-term relationship player,” she said, “I would rather forego a deal or forego an opportunity to either gain a long-term partnership or maintain a long-term relationship. And I’ve always been that way.”

She says often times generalists seek her advice on a particular healthcare subsector where they may not have as much expertise, and she’s always happy to provide her thoughts even if it does not automatically lead to a deal.

“All of those phone calls and time that people would say is a waste of time because it may not be related to a direct immediate deal are what enhances relationships and partnerships over the years,” she says. “I have dozens of relationships that are span over decades. That only happens when you create meaningful connections with people,” she adds.

Tell us what you think on LinkedIn, Instagram, Facebook, or Twitter! @opusconnect.

By Lou Sokolovskiy, Founder & CEO at Opus Connect
Sept 2022

Embedded Finance: Driving the Future

In our modern world businesses are becoming more consumer oriented and user friendly – consumers have a variety of options to get the best experience and product/services with minimum effort online and offline. If you get your Uber in the morning and use your Apple Pay to buy a cappuccino on your way to the office you’re already taking advantage of ‘Embedded Finance’. If you’re looking to buy a nice bag for your mom, Affirm or Klarna can finance your purchase via their buy-now-pay-later model. So, what is Embedded Finance and why this has become yet another buzz word?

Embedded Finance comes from the general concept of Banking as a Service, or BaaS. BaaS allows non-financial companies to offer access to standard banking products and features at point of sale. This is enabled through webhooks and open APIs (Application Programming Interfaces) – Embedded Finance is more defined by the front-end access to financial services, whereas BaaS is more defined by its back-end banking functionality. This integration via open banking systems and API architecture allows e-commerce platforms, websites, apps and other non-bank businesses to deliver financial services, often white-labeled, to their customers. Now, without the burden of regulatory and compliance oversight of being a traditional bank, embedded finance enables you to offer to your customer additional features to accelerate your sales and engagement, simplify user transaction experience and generate new revenue streams.

According to recent studies, the Embedded Finance market globally is expected to reach $7 trillion in the next 10 years. This is a huge opportunity for banks, fintech companies and other non-bank lenders. VC investors have been fast to recognize the potential value in the niche – the chart below depicts global VC investments in Embedded Finance companies from 2016 through September 2021, and we’re just in the beginning of the cycle.

Source: Statista 2022

 

This is a global phenomenon – young population and technology advancements drive embedded finance in China, India, Indonesia, several Latin American countries and, of course, the US, Europe and the UK, the latter being one of the earliest adopters of BaaS models. This trend created a lot of opportunities for virtual banks, also known as neobanks, fintech companies, BaaS and, of course, embedded finance. These models are taking a growing share of overall transaction volume compared to traditional banks. Quoting J.P. Morgan CEO Jamie Dimon, “The role of banks in the global financial system is diminishing”, and millions of newly added accounts by neobanks prove it. Embedded finance future lies in several major applications:

Embedded Payments

Payment processing involves an automatic pay feature with your saved credit card or digital wallet. PayPal and Stripe have been at the forefront of embedded payments for several years now, while other players are coming to the market to address other areas such as international transaction complexities, user onboarding processes, KYC compliance, virtual credit cards and others. These solutions make the process more secure and streamlined, help protect from fraud, card management and fulfillment, reduce transactional fees and provides liquidity faster for various jurisdictions.

Embedded Insurance

Renting a car, booking a trip, obtaining Airbnb host protection and other goods and/or services purchases come bundled with an insurance protection coverage in the same offering. An embedded insurance solution is usually integrated into an existing system through an API, which helps insurers analyze policy and price data and suggest the right policy at the point of sale.

Embedded Lending

Embedded lending is split into two significant components: Retail lending and Business lending. Affirm and Klarna are great examples of B2C lending, where capital provider would face consumer credit risk based on FICO score or other proprietary alternative scoring system. Business lenders are B2B capital providers and include such companies like Kabbage, Fundbox and others targeting SME’s (small to mid-sized enterprises). Sometimes these providers are standalone offerings integrated into customer’s ERP systems, and sometimes they target specialized software products to give a supplier or vendor an option to get paid early on the product sold or job completed. The structures could vary from lending to revenue-based model, advances against receivables, purchase orders and inventory. These working capital solutions help consumers purchase discretionary products and help small business sustain their working capital requirements and overhead as well as create stronger trade networks with customers and suppliers.

Embedded Investing

Another extension of Embedded Finance is Embedded Investing, or providing robo-advisory, brokerage and wealth management services to consumers. Acorns, for example, delivers micro investing, full automation and adjustments according to your goals and wishes via automatically investing your spare change. PayPal now offers crypto purchases through their platform, which also changes the way brokerage services are offered and consumed.

Our everyday life includes a wide variety of transactions, and they are increasingly being digitized. Embedded Finance will continue to grow as tools to offer a digital product and deliver a more convenient and flexible customer experience. It can help streamline the payment process, allow customers to earn points and rebates, improve savings, protect data security, and make businesses more efficient and resilient. Embedded Finance will bring additional structural changes to the finance world and revolutionize capital flows over time – this creates great opportunities for VC and Private Equity on the technology side and debt providers on the B2C and B2B side. The first players who embrace the changes are the most likely to win.

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By Alisa Rusanoff, Portfolio Manager, Senior Vice President at Crescendo Asset Management
September 2022