Investment Strategy

Disciplined Value Buyers With Proven Performance

We are disciplined value buyers in companies with unrecognized growth potential. There are two specific, significant gaps in funding that we seek to address. We generally seek opportunities with companies in the lower middle market (less than $50MM revenue), along with select early stage venture investments that are able to demonstrate product validation. AGS seeks to partner with talented entrepreneurs to build exceptional companies. We aim to be a value-added partner through the life of our companies, from building investor syndicates and talent recruitment support, to scaling opportunities and identifying exit opportunities that meet management and investment goals. Our investments typically start at $200,000, and we will invest up to $3MM in the life of a company.

Lower Middle Market Investments

Our strategy is to utilize a combination of equity investment and debt financing to invest in, or acquire, companies. We also prefer to stay out of the ultra-competitive middle market, instead focusing on small companies with growth potential. We understand lower middle market businesses, and believe this space is rich with entrepreneurial talent that may lack the resources to independently grow and outperform competition. We are confident in our ability to identify those opportunities and create value for our portfolio partners.

We look to leverage assets to maximize equity ownership, and also utilize our excellent contacts with banks for access to further needed capital. AGS looks for companies with a stable track record, but we also invest in turnaround opportunities. Often, a solid business will lose a major customer to bankruptcy, and they then fall out of covenant with their bank, their loan is called - and they have no way to salvage an otherwise profitable company. We believe these are companies worth saving.

Our investments are typically in niche manufacturing, unique service companies and specialty value-added distribution - with revenues generally up to $50MM, and EBITDA under $3MM. While we are somewhat agnostic to industry, we are not agnostic to the niche of companies where we invest. Our focus is not narrowed to specific industries like many investment firms; we instead focus on company size and scalable opportunities. We prefer established organizations with existing customers, preferably a proprietary product and a constant source of revenue. They represent an opportunity to generate attractive returns through growth, improving the business operationally, and through financial expertise. We look for:

  • Defendable market positions - due to high barriers to entry, geographic and cost advantages, or a clearly differentiated strategy;
  • Participation in a growing industry with stable demand;
  • Low cap-ex requirements;
  • Significant growth potential internally or through further acquisition;
  • Critical supply relationships with diverse customer base; and
  • High return on invested capital.

Select Early Stage Venture Investments

Early stage capital is very hard to attract. New ventures often struggle to get product to revenue, even when the market opportunity is ripe and product validation can be demonstrated. In both situations, setbacks or the inability to attract capital does not correspond with the company's long-term fundamentals. We recognize 3 'stools' to early stage investing: novel technology, talent and financing. For the novel technology - we are not the scientific or technical minds behind the ventures we back. We identify the business opportunity, convene the right people, ask the right questions, and help develop the idea into a marketable product. For talent - we combine our penchant for growing businesses with the existing management team to help businesses prosper. Generally, we take an active role in helping management achieve strategic, financial and operation objectives. We also utilize our extensive networks to put qualified individuals into needed roles. For financing - our job, first and foremost, is to ensure adequate capital is available to nurture the ventures. We bring our capital to the table, but we also look to collaborate because of our solid relationships with other VC firms and our strong contacts with banks.

We prefer to be the first money in, though not a requirement. There is a responsibility in that preference, to be the lead investor - and we accept that responsibility. We will work to develop a syndicate of investors, if needed. Our existing infrastructure also allows us to take a more active role in incubating and developing startups. AGS invests in capital efficient businesses. We invest in companies and management teams that meet certain criteria:

  • Management has exceptional skill and proven experience in the respective field;
  • Product is in demand in an underserved, growing market;
  • Product validation can be established prior to revenue, predictive of a high adoption rate in marketplace;
  • Revenue will be attainable within 18 months;
  • Limited downside risk;
  • An exit timeline of 5 years, on average; and
  • Returns will at least meet 5x investment.