The Gift a Backer Brings Is Focus

This is part two of a three-part series on how we partner with the management teams of the companies we back.

Every strong management team I have backed has the same problem: too many opportunities competing for the same people, capital, and management attention. The challenge is rarely finding good ideas. The challenge is deciding which ones happen now, which ones happen later, and which ones wait. Capital can usually be found. Management attention is the truly scarce resource. Every investment decision is ultimately an allocation of management attention. What management teams often lack is a partner willing to help create that focus and then fully fund the choices they make. That is the role I try to play. Last week, sitting with the leaders of one of our companies, we put every initiative they wanted to pursue on the table. The list was long and every item was a good idea with an owner who believed in it. The work was not generating ideas. It was deciding which ones to back first, and which good ideas would have to wait.

A founder who built the company already lived this. You had ten things worth doing and the runway for three. A good backer does not show up to tell you which three. A good backer makes sure the three you pick are funded properly and shielded from the noise that pulls a team in ten directions. Every initiative has a champion. Every initiative sounds important. The hardest part of planning is not deciding what to do; it is deciding what not to do yet.

Everything is a priority until it requires budget or resources. That’s not strategy. Strategy is a set of choices that are hard to undo.

Choosing is the team's call; funding it is mine

I did not walk in and cross things off their list. The leaders know their business far better than I do, so the prioritization was theirs to make. My contribution was to bring capital, a little discipline, and a framework that forced real trade-offs – and then put real money behind what they ultimately chose.

We put the plan on a calendar together. The first year across four quarters, the rest staged behind it. The moment an initiative has to claim a specific quarter, a specific budget, and specific people, a team has to make real trade-offs, and they made them. Two leaders who both wanted the same engineers in the same quarter worked out who went first. That is healthy, and it was theirs to decide. The most important decision we made was not what to do. It was what to postpone. Every initiative had merit. Not every initiative earned a place in the first year. That is where focus comes from.

My job in that room was to make sure the choices were funded, not starved. Plenty of buyers tell a team to do more with less. I would rather help them do the few right things with enough.

I have made the opposite mistake with my own capital, years ago. I funded too many things at once because every one of them looked worth doing, and I learned that spreading money thin is a slow way of wasting it. Now I would rather back a team to do a few things all the way than watch a dozen good ideas each get half of what they needed.

A team can feel the difference between a backer who is buying time on their calendar and one who is buying into their judgment. I try hard to be the second kind.

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Protecting the foundation the team relies on

The leaders flagged the unglamorous work that everything else depends on. The systems, the data, the support desk that keeps customers happy. These rarely make the headline board slide because they are difficult to celebrate and easy to take for granted, and they are exactly the things a short-term owner cuts to hit a number. We funded them first. That decision carried an opportunity cost. Funding foundational work meant some growth initiatives moved back in the schedule. The team made that trade willingly because they knew the foundation would determine whether the growth investments succeeded.

This is where a backer earns trust. When management says the foundation matters, the cheap move is to nod and underfund it anyway. Backing the team means putting money where their judgment points, especially on the things that will not show up in next quarter's results.

Founders feel this one in their gut. You know which unglamorous things hold the place together, and you have watched people who do not know the business threaten to cut them. A backer who funds the foundation on the team's word is a backer who respects what you built.

Everything is a priority until it requires budget or resources. That’s not strategy. Strategy is a set of choices that are hard to undo.

Paul W. Swaney III 

Capital that is committed, behind a plan the team owns

The plan is funded. There is committed growth capital behind it, deployed against the priorities the team set, not promised against some future raise. For a management team, that certainty changes how they lead. They can make decisions knowing the money is real.

We also looked for savings the business had not yet captured. Better terms on spend, capacity the team's own operating improvements were already freeing up. Every dollar we found went back into the priorities the leaders had chosen. Found money funded their plan.

The principle is simple, and the team set it as much as I did. Money follows the strategy the operators believe in. Nothing gets chased for its own sake.

Sequencing and certainty are underrated in a sale. A team that has spent years scrapping for budget, suddenly knowing the growth capital is committed and theirs to deploy, starts thinking bigger almost overnight. I have watched leaders bring forward ideas they had shelved for years, simply because the money was finally real and the person holding it trusted them to spend it.

Why this is easier with a fundless sponsor

Because I invest as a fundless sponsor, the capital decision and the relationship sit with the same person. When management presents a plan, they are talking directly to the person who can approve the investment and commit the capital.

For founders, that creates clarity. The operators retain authority over prioritization, and they gain a partner whose incentives are aligned with funding those priorities well. There is no distant committee deciding whether the plan is worthy of support. The person backing the business is the same person accountable for the outcome. If you have built a company with more opportunities than your organization can realistically pursue at once, the challenge is probably not capital. It is focus. The best partnerships I have seen begin when management decides what matters most and finds a backer willing to fund those priorities completely. I am always glad to talk.

Paul W. Swaney III is the founder of Swaney Group Capital, a fundless sponsor focused on acquiring and operating lower middle market businesses. LeverUp® publishes at least weekly. More if I have something extra to say