How should Apis & Heritage determine the appropriate scale and strategy for its second investment fund, given the firm’s mission to expand financing for employee ownership, limited track record, investors’ expectations around growth and discipline, and the operational risks of rapid expansion?
How should Apis & Heritage determine the appropriate scale and strategy for its second investment fund, given the firm’s mission to expand financing for employee ownership, limited track record, investors’ expectations around growth and discipline, and the operational risks of rapid expansion?
Tamer Institute for Social Enterprise and Climate Change
In early 2025, the founding partners of Apis & Heritage Capital Partners (A&H), Todd Leverette and Phil Reeves, faced a pivotal decision as they prepared to launch the firm’s second private credit fund. Founded with a mission to generate competitive market returns while expanding employee ownership across the United States, the firm had successfully raised a $58 million inaugural fund focused on investments in profitable lower-middle market companies. As they looked to raise their next fund, however, the partners proposed an ambitious target of $250 million.
Within the impact-driven private investments space, there are a plethora of challenges faced by emerging fund managers, especially those looking to differentiate impact strategies, such as A&H’s model, which emphasizes transitioning companies to employee ownership. Their first fund faced challenges because of their relatively small size operating in a market not well served by other finance providers. As the partners weighed whether to pursue such a bold fundraising strategy or adopt a more conservative path of incrementally increasing subsequent fund size, they confront various trade-offs related to scale, strategy, limited partners’ expectations, and the difficulty that comes with staying small. The case introduces students to the nascent employee ownership investment movement, and asks students to evaluate how emerging fund managers should think about scale, timing, and market positioning in the realm of mission-driven investment managers.