Podcast Summary:

How I Invest with David Weisburd
Episode: E285 – The Lower Middle Market: Where Private Equity Still Generates Alpha
Guest: Jeff (Corbel Capital, launched in 2014; formerly of Ares)
Date: January 19, 2026

Episode Overview

This episode centers on the unique investing opportunities and operational challenges in the lower middle market of private equity, featuring Jeff, founder of Corbel Capital. The conversation unpacks how Corbel has navigated capital raising, team building, growth strategies, SBIC funds, and current investment opportunities in distressed and special situations. Jeff reflects on lessons learned from his time at Ares and how those insights inform Corbel’s distinctive approach to generating alpha where larger players often overlook.

Key Discussion Points & Insights

Launching Corbel: The Aha Moment

• Origin Story: Jeff founded Corbel after identifying a gap in providing structured capital to small businesses. He realized that "there was really no one providing what we would call structured capital to small businesses" that allowed owners flexibility (00:10).

• Market Void: Traditional banks had exited the small business lending market, and private equity approaches weren’t fitting the needs of these owners.

  “That void in the market created a real opportunity for me to raise a fund around that strategy and generate off market risk adjusted returns for my investors.”
  — Jeff (00:55)

Shifting from Investor to Entrepreneur: Skills & Surprises

• Underestimating Infrastructure Needs: Jeff was surprised by the operational demands of running a firm versus just doing deals. Managing people and infrastructure required as much time as dealmaking (01:41).

• Managing versus Doing: Described the transition as moving from player to player-coach, eventually to manager, while trying to grow a finance business without sacrificing investment rigor (02:56).

  “…I probably spend as much time managing the firm as I do working on individual deals. I’m not sure I appreciated how time consuming that would be, but it’s been really rewarding.”
  — Jeff (02:17)

Fundraising Journey & Capital Base Evolution

• Early Fundraising Tactics: Corbel began with capital from high net worth individuals and small family offices, forgoing placement agents and formal introductions to institutions (04:03).

• Reintroduction Challenge: As the franchise grew, each new fund iteration required reintroducing Corbel to institutional investors, since earlier investors would "tap out" as their allocations reached limits or priorities shifted (04:03–05:44).

  “...Each fund that we've raised, especially as we've moved into different strategies, has been a little bit of a new reintroduction exercise.”
  — Jeff (04:41)

Strategy: Horizontal Growth in Fund Design

• Horizontal vs. Vertical Growth: Rather than scaling fund sizes vertically, Corbel raised multiple parallel funds (SBIC debt, special opportunities, equity), all focused on the lower middle market. This avoids outgrowing their core investment edge (07:27).

  “We’ve grown the firm horizontally rather than vertically… all focused on the lower market, which is even below the lower middle market.”
  — Jeff (07:32)

• Fund Lifecycle Stagger: Each fund is at a different stage—investment, harvest, fundraising—enabling continuous firm momentum (09:01).

Building Scale & Team Alignment

• Low Turnover, Internal Promotion: Corbel built a culture of promoting from within, ensuring that senior talent "understand our DNA and investment strategy" (10:00).

• Cross-Fund Involvement: All investment pros work across funds and share in promote (carry) across them, aligning interests and broadening skillsets (10:50–11:30).

  “All of the investment professionals work across all of the different funds and all of the different strategies, they're all personally invested in those funds and they're all promoted in those funds.”
  — Jeff (10:47)

Recruiting and Retention in Lower Middle Market PE

• Challenges: Without megafund management fees, it's harder to pay top-market salaries.

• Value Proposition: Offers a more entrepreneurial experience, cross-product exposure, and early access to carry, creating wealth potential for even junior staff (12:46).

  “We try to create a more entrepreneurial experience in the long term. …You are a participant in that early on.”
  — Jeff (12:54)

SBIC Funds: Structure, Benefits, and Obstacles

How SBIC Funds Work

• Description: The Small Business Investment Company (SBIC) program provides low-cost, attractively structured leverage to private investment firms, enhancing returns to LPs (14:14).
• Corbel Example: Their 2017 vintage SBIC fund paired $175M private capital with $175M in government leverage, borrowing at sub-2% rates and generating “mid-20s returns on both a gross and net basis” (15:09).
• “Sometimes you have the SBIC funds, the net is actually either the same or higher than the gross… It's pretty wild.”

  — David Weisburd (15:50)

Barriers to Entry

• Cumbersome Process: Licensing is thorough, bureaucratic, and GPs must maintain strict eligibility—many age out as their fund sizes grow (16:08).

  “…It's just, it's an onerous process. …There are a lot of GPs who don't have the right track record, the right team composition, …patience to go through what is a difficult bureaucratic process.”
  — Jeff (16:14)

• LP Base Limitations: Banks are frequent LPs (for regulatory credit); less so institutions and family offices, due to fund size limits and lack of proactive marketing (18:27–19:22).

Current Market Outlook: Where’s the Alpha Now? (Q4 2025)

• Special Situations Ripe for Opportunity: Ongoing inefficiency in the lower middle market creates alpha; special situations are especially attractive with a “significant maturity wall” of loans coming due and tightening credit conditions placing pressure on small businesses (19:52–21:56).

  “The inefficiency continues to be an important driver of value and the ability to in an old school private equity way, help make the businesses that you invest in better and more profitable.”
  — Jeff (20:08)

• PPP and Main Street Loan Aftermath: Pandemic-era lending and current credit tightening are catalyzing distress, creating fertile ground for adept, specialized investors.

Corbel’s Approach to Distressed & Special Situations

• Hybrid Model: Blends private credit and equity approaches to tackle distress in the lower middle market (22:11).

• Team Build & Track Record: Hired a bankruptcy attorney to run the first special sits fund, generated 30%+ gross IRR, used a mix of distressed buyouts and secondary loan purchases (22:24–23:58).

• Execution Advantage: Experience and relationships in the space enable swift, reliable capital deployment—a must for distressed deals.

  “You have to be able to move quickly and efficiently. …If you develop a reputation of being somebody who retrades at the 11th hour… nobody's going to take your Lois or your indications seriously.”
  — Jeff (25:52)

Takeaways from Ares & Lessons Learned

• Risk-Reward Structuring: Brought Ares’ sophistication down-market, leveraging complexity for outsized returns through thoughtful structuring.
• Deal Selection: Seeks opportunities with complexity and asymmetrical risk/reward rather than “straight down the middle” buyouts (24:30–25:28).

Advice to Past Self & Future Fund Managers

• Institutional Capital Building: Would have prioritized attracting institutional LPs and building long-term partnerships earlier, despite short-term efficiency of relying on smaller, familiar pools (27:27).

  “If I would have made a more concerted effort to market the story and the firm to longer-term institutional investing partners, it would probably have made subsequent fundraising ... less challenging than it's been.”
  — Jeff (27:38)

Notable Quotes & Memorable Moments

• “I probably spend as much time managing the firm as I do working on individual deals. I’m not sure I appreciated how time consuming that would be, but it’s been really rewarding.”
  — Jeff (02:17)

• “We've grown the firm horizontally rather than vertically… all focused on the lower market, which is even below the lower middle market.”
  — Jeff (07:32)

• “All of the investment professionals work across all of the different funds and all of the different strategies, they're all personally invested in those funds and they're all promoted in those funds.”
  — Jeff (10:47)

• “The inefficiency continues to be an important driver of value … the ability to in an old school private equity way, help make the businesses that you invest in better and more profitable.”
  — Jeff (20:08)

• “If you develop a reputation of being somebody who retrades at the 11th hour, you're not in the business for a very long time.”
  — Jeff (25:57)

Important Timestamps

• (00:10) – Corbel’s founding: Identifying the lower middle market opportunity
• (01:41) – Moving from dealmaking to firm management
• (04:03) – The evolution and reintroduction of the investor base
• (07:27) – Horizontal fund growth strategy
• (12:46) – Recruiting and incentivizing talent
• (14:14) – SBIC fund mechanics and benefits
• (19:52) – Special sits/distress as 2025's best opportunity
• (22:24) – Why Corbel built a dedicated distressed fund
• (24:30) – Applying Ares experience to the lower market
• (27:38) – Advice to past self on building an LP base

Final Thoughts

Jeff’s story embodies the unique challenges and rewards of operating in the overlooked but fertile lower middle market. Key to Corbel’s success has been a deliberate strategy of scaling horizontally, tightly aligning internal incentives, leveraging specialized public-private capital programs like SBIC, and committing to speed and reliability in “messy” distressed scenarios.

For listeners interested in real, repeatable private equity alpha, the message is clear: go where the big money won’t or can’t—and build the infrastructure and integrity to dominate there.