At one of our portfolio companies with 50% growth, <$10mm ARR, and nice retention, we’ve been asking ‘what if a majority recapitalization is the smarter next step than raising a traditional Series B?’ Here’s why more founders should consider a majority recap over a B.
Recaps Support Both Organic and Inorganic Growth. Private equity partners often can help companies scale both organically and through acquisitions. Series B investors tend to focus on one track: pour fuel on organic growth, then raise again to fund M&A later.
There Are More PE than VC. VCs that do Series B deals often want $10M+ in ARR, steep growth curves, or clear paths to unicorn territory. That narrows the field. Meanwhile, there are way more private equity firms looking to back good, founder-led companies under $10M ARR.
You’re the CEO. In both a recap and a Series B, the founder often remains CEO. Don’t think that just because you’ve sold a majority of the business to private equity, you’re not going to be the boss. Below $10mm or even $20mm of ARR, you’re most definitely the CEO.
Liquidity is greater. A recap allows you (and your early investors or employees) to take some chips off the table without walking away from the upside. Series B rounds typically offer little or no secondary liquidity, keeping all the risk in play.
Longer term view. PE firms are often more comfortable with steady, profitable growth whereas Series B investors generally want much faster growth. If you look like the former, a recap may be a more sustainable and even enjoyable path.
Banker led process. A recap that is competitive requires hiring a banker, running a formal process, and navigating change-of-control dynamics. That’s more complex than a relationship-driven Series B. Let us know if you need intros to great SaaS investment bankers (sammy@blossomstreetventures.com is my email).
If you’re a founder in the $8mm to $20mm ARR zone, don’t assume a Series B is your only option. A majority recap could offer more strategic value, more flexibility, and more upside than you think.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Email the author at sammy@blossomstreetventures.com.