Private equity investors may not be the biggest contributors to funding for the U.S. startups, but one cannot ignore their contribution in helping build a good percentage of small businesses into giants in their respective industries. Especially, in case of small entrepreneurs looking to scale their business beyond a certain country, or continent.

In every startup’s journey to grow big, and to make a name for itself, there is needed urgent cash at some point or the other. It can be required to purchase a plethora of business-specific inventory, like new equipment, machines, real estate, or other vital necessities to run a company. Because when the consumer demand increases for your product or service, you need more cash to build and manufacture a product in bulk, thus requiring more machinery, and manpower.

And who better than reaching out to the U.S. private equity association, or a wealthy investment professional with deep pockets. Even, amid the pandemic, the cash reserve of the U.S. private equity sector is still intact. In this crisis situation, when private equity jobs are quickly getting depleted because of mass-layoffs, PE is not much affected in the talk about country.

Having said that, the funding from PE can actually save many small firms in the U.S. from going out of the business, and hence, can save a number of private equity careers.

Case Studies That Prove PE Has Backed Business Growth in the U.S.

Cosmetics Company Urban Decay
It was 2009 when Castanea Partners bought the American cosmetic brand Urban Decay. Wende Zomnir, the Chief Creative Officer at Urban Decay, started the journey with Sandy Lerner - Co-founder of Cisco Systems. He later said in a statement that it’s the US private equity firms that understand luxury retail and brands, better than anyone else.
However, the irony was that not all of the cosmetic company’s partners understood the luxury retail that well. Meanwhile, the company located in Newport Beach (California) has had issues with distribution abroad. Urban Decay’s makeup was then sold by three English retailers, with 70% sales coming from Boots. But, the CEO of Urban Decay, Tim Warner, didn’t feel happy with the way drugstore was showcasing the company’s products in the market.

He rethought the partnership and pulled out on its association with Boots. Concentration was rather put on the other two UK retailers, House of Fraser and Department Stores Debenhams.

Private equity investment professionals from Costanera, in their statement, said - “We have already known that it’s a risk, but still, decided to back Urban Decay”. Eventually, the bet paid off, and UUrban Decay was able to expand its business across the UK. Its revenue rose gradually from $42 million in 2008 to $103 million by the year 2011. Castanea, later, sold the cosmetic firm to L’Oreal, thereby earning eight times its original investment.

The Case of Restoration Hardware - A U.S.-Based Home Furnishing Retailer
In the year 2008, Catterton Partners, an American private equity company, made investments into Restoration Hardware, a US-based home-furnishings retailer that was fighting hard to survive in the market amid the intense competition. Restoration happened to be a public company until Catterton Partners made it go private.

The concerned PE firm, in a period of four years, made the number of the retail stores of the home-furnishing company go from 110 to 80. They decided to shut down the stores located in the mall-based, or other smaller selling points. The managing partner of the PE firm, Michael Chu, instead decided to go with ‘gallery stores’ that are bigger in size and area, and are located in multistory spaces. These places were much aspirational and airy, which the customers liked.

Precisive refocusing on the strategy, and shrinkage in the number of stores eventually helped make the revenues go up by two times than it was before. Catterton, later, took the firm back to the public in the year 2012.