In the world of private markets, the firm SMB Value Investing Group (SMB VIG) presents a compelling proposition: disciplined value investing into small and mid‑sized businesses that often fall under the radar of larger institutional players. The core mission of SMB VIG is to provide accredited investors with access to “Main Street” opportunities—businesses operated with strong fundamentals, visible growth potential, and attractive entry valuations. By focusing on overlooked companies with enduring cash flows, the firm aims to offer outsized risk‑adjusted returns.
A mission centred on value and transparency
At the heart of SMB VIG’s approach is the idea that many private businesses—businesses that may not garner broad attention or the headlines of large-cap deals—offer tremendous value when approached with the right lens. SMB VIG states that it was created “by and for value investors” with the goal to identify, evaluate, and invest in such ventures across a spectrum of industries in the U.S. and Canada. The platform emphasises transparency, alignment of interests (the firm co‑invests alongside its clients), and long‑term compounding of value.
This focus on the “middle market” or lower‑end of private‑business deals comes with several implications. These businesses typically operate in fragmented markets where scale and professionalization offer meaningful upside. They tend to have less analyst coverage, which means that smart underwriting may yield opportunities unavailable in crowded public markets. SMB VIG leans into this opportunity by bringing structure, diligence, and transparency to such deals.
Investment criteria: what makes a business eligible
SMB VIG sets a clear framework for what kinds of companies it will invest in—and what it will avoid. Their investment criteria emphasise the following characteristics:
-
A proven operating history (10+ years) and established brand presence.
-
Strong profitability with EBITDA margins of 10% or higher.
-
Robust free cash flow generation and low capital intensity (important for resilience).
-
Large, fragmented markets where the business has organic growth levers such as geographic expansion, product or service diversification, channel development, or consolidation opportunities.
-
Attractive entry valuation—typically in the 3‑6× LTM EBITDA range, which gives a margin of safety and upside potential via multiple expansion.
Conversely, SMB VIG avoids businesses that are highly cyclical, commodity‑based, dependent on a single customer, lacking scale, or operating in low-margin structures. These negative filters help avoid capturing returns from businesses with structural risks or limited upside.
Investment process: from screening to monitoring
The investment process at SMB VIG is methodical and layered. The seven‑step approach includes: previewing opportunities, executing non‑disclosure agreements for deeper access, performing deep‑dive diligence, engaging in sponsor sessions, commitment and allocation, documentation and funding, and then ongoing monitoring and oversight.
Importantly, SMB VIG enables deal‑by‑deal investing. Investors are not locked into a blind pool but can select opportunities that align with their risk profile and preferences. This flexibility is combined with a platform structure that simplifies the investment journey—providing investors with access to high‑quality deal flow, diligence materials (investment memo, full deck, QoE reports), and sponsor interactions.
Another distinguishing feature: alignment of interests. SMB VIG co‑invests alongside investors, does not charge annual management fees, and instead takes a performance/ carried interest structure—20% carried interest on profits after a 16% IRR hurdle rate. Administrative fees are modest and shared among investors.
Why this investment thesis stands out
There are several reasons why SMB VIG’s approach may appeal:
1. Margin of safety through valuation and business quality
By targeting businesses at entry multiples of 3‑6× EBITDA, SMB VIG builds in a cushion. The low multiple reduces risk and allows upside from multiple expansion if scale and professionalization are achieved. Combined with businesses that already exhibit profitability and cash flow resilience, this creates a strong risk‑adjusted foundation.
2. Diversification in private markets
Investing in private, small to mid‑sized businesses offers low correlation with public markets. For investors seeking exposure beyond listed equities and traditional funds, SMB VIG’s model provides access to an asset class that is often under‑represented and potentially under‑hyped. Their portfolio shows deals in industries like transportation, IT services, home furnishings, addiction treatment, marketing services, tax & accounting, widely spread across geographies and sectors.
3. Value creation levers beyond purchase multiple
Because SMB VIG focuses on businesses that are already operating well, the upside often comes from management professionalization, strategic improvements, revenue growth levers (e.g., geographic expansion or new service lines), operational efficiencies, and eventually an exit at a higher multiple. The combination of growth + multiple expansion is a compelling model for value investors accustomed to buying undervalued assets and unlocking latent value.
4. Transparency and access
Access to private opportunities is often reserved for large institutions or insiders. SMB VIG’s model opens the door to accredited individual investors in a more streamlined way—with full access to deal materials, sponsor dialogues, and participation flexibility. This democratization of access is increasingly relevant for sophisticated private‑market investors seeking alternatives.
Real‑world examples of investments
SMB VIG’s portfolio showcases tangible deals across many sectors. Examples include:
-
A commercial transportation business with an enterprise value of $48.61M at ~4.9× EBITDA.
-
A drug & alcohol addiction treatment company in Ohio, with EV of $27.5M at ~4.0× EBITDA.
-
An interior design & home furnishings company valued at $19.0M (~4.0× EBITDA).
-
A managed IT services business valued at $4.8M (~5.7× EBITDA).
These examples illustrate the size of deals (enterprise values ~$5M–$50M) and the entry debt valuations, consistent with the stated criteria of 3‑6× EBITDA. Also notable is the diversity of sectors: transportation, IT services, home furnishings, marketing services, etc.
Considerations and risks
While the SMB VIG model is compelling, investors should keep in mind several caveats:
-
Illiquidity: Private business investments typically have longer hold periods (SMB VIG targets 4‑7 years) and exits are less liquid than public equities. Returns depend heavily on successful exit events.
-
Deal‑specific risk: Because each investment is unique, individual company execution risk (management, market dynamics, competition) remains high. Diversification across deals is important.
-
Valuation and exit uncertainty: While entry multiples may be attractive, the ability to exit at higher multiples isn’t guaranteed. Market conditions, interest rates, macroeconomic factors, and sector shifts can impact exit valuations.
-
Accredited investor requirement: Access is limited to accredited investors meeting specific net worth or income thresholds.
-
Non‑registered investment adviser: SMB VIG states it is not a registered investment adviser, broker‑dealer, law firm, or tax advisor; and the site notes that private securities are speculative, illiquid, and may result in loss of capital.
Why it matters in today’s investment landscape
In recent years, many traditional value‑investing opportunities in the public markets have become more crowded or subject to short‑term investor sentiment. Meanwhile, middle‑market private businesses continue to provide fertile ground for value‑oriented strategies—especially those willing to do the heavy lifting of diligence, operational improvement, and long‑term thinking. SMB VIG’s platform responds to this shift: providing a vehicle for value‑investors to participate in private‑business deals with institutional discipline.
Moreover, by focusing on markets that are fragmented and less efficient, and businesses that are operationally solid yet under‑discovered, SMB VIG taps into a segment where value creation mechanics (e.g., improving operations, expanding geographies, rolling up smaller competitors) can be powerful. For investors seeking alternatives beyond public stocks and large‑cap private equity funds—and wishing to align with long‑term, fundamental thinking—this model can offer an attractive complement to more traditional portfolios.
Conclusion
The SMB Value Investing Group offers an intriguing avenue into value investing beyond the public markets, by focusing on small and mid‑sized businesses that meet rigorous criteria, operate in large fragmented markets, and offer potential for growth and multiple expansion. Its disciplined process, transparency, co‑investment alignment, and access to vetted deal‑flow position it well for investors seeking meaningful exposure to private‑market opportunities.
However, as with all investments, the private market context demands careful analysis, a long‑term horizon, investment in a portfolio of deals (rather than a single hold), and an understanding of the illiquidity and execution risks involved. For accredited investors aligned with the philosophy of value investing—buying well, holding for scale, and compounding—the SMB VIG model may indeed open an attractive door to “Main Street” value.
