Private Equity
Private equity firms have a 10-year clock. The businesses they buy don’t always know this — but it determines everything about how the deal will go.
What Private Equity Actually Is
Private equity is the business of buying non-public companies using pools of investor capital, improving (or extracting value from) those companies, and selling them within a defined fund timeline. The typical structure: a PE firm raises a fund from institutional investors (pension funds, endowments, family offices), charges 2% of assets annually as a management fee, and takes 20% of profits (carry) on exit.
brent-beshore of permanent-equity explained the standard model, and why his firm inverts it: “Traditional private equity — you raise a fund and you get 2% of the amount every year. Every year. Which is actually like getting 20% of the total over a 10-year fund life. Which is kind of insane. People in private equity get paid well because it’s hard and not many people can do it.”
The 2-and-20 structure creates a specific incentive: fund managers are paid well regardless of performance (via the management fee) and paid exceptionally well only if returns are strong (via carry). This can lead to fee-extraction behaviors that don’t serve portfolio companies.
The Small Business Gap
One of the most-discussed MFM themes is what happens below the bottom of traditional PE’s interest: the boomer business succession wave.
shaan-puri laid it out: “Do you know how many boomers are retiring right now? It’s some absurd number — a quarter of the country, maybe a third. The biggest wealth transfer of all time is about to happen. And similarly, there are many many businesses where the owner wants to retire, their kids don’t want to take it over, and those businesses are up for grabs. They’re too small and too unglamorous to be a startup. Too small for big private equity.”
This gap — profitable, established, boomer-owned businesses that are too small for institutional PE — is where most of MFM’s acquisition entrepreneurship discussion lives. It’s where brent-beshore operates, where Shaan’s investment in Enduring Ventures is focused, and where codie-sanchez has built her brand.
Permanent Equity as the Anti-PE
Permanent Equity is explicitly designed as the structural opposite of traditional PE. No fees of any kind. No debt. Thirty-year initial capital term instead of ten years. Forty percent of free cash flow as profit share, rather than a management fee plus carry.
Brent explained the rationale: “I don’t need the fees because I’m already paying for the team and overhead. I just want to be entrepreneurial — if we make money, we share in that.”
The 30-year hold is the most radical departure. Traditional PE is structurally required to sell — the fund has a 10-year life. Permanent Equity treats acquisitions as permanent relationships. “We have a 30-year initial term on our capital. A typical private equity firm has 10 years.”
For sellers, this matters enormously. Brent describes the advantage of Permanent Equity’s speed and certainty over traditional PE: “With private equity, you’ll be dragged along for six months, they’ll ask you for all sorts of nonsensical stuff, and by the time the entrepreneur is burned out, it’s just a shitty feeling. With us — you send a message through the website, my assistant sources through it, I’ll look at it and say okay, ask for the P&Ls within a week or so, give you an LOI, and we can close in 30 to 40 days after that.” (This quote appears via Syed Balkhi’s description of his own approach, but mirrors Brent’s stated philosophy.)
How Brent Discovered Private Equity
Brent didn’t set out to be in private equity. He accidentally bought his first business at 24 — an ad agency client left at the altar by two other buyers — and only later learned there was an industry called private equity: “Somebody said, ‘Oh, you did a private equity deal,’ and I literally Googled private equity and thought, ‘Turns out there’s a whole industry of people that do this. Why wouldn’t they do it in smaller companies?’”
That first acquisition — bought with an SBA loan and leveraged accounts receivable — became the cash cow that funded everything that followed. Five years later, he did his second deal. The grind is longer than the success stories suggest: “You started this 16 years ago. You have to grind, or at least be consistent, for a decade-plus.”
The Failure Rate Nobody Mentions
Brent’s candid observation about the boom in small business acquisitions: “It’s brutally difficult, and it’s so easy to lose a bunch of money. I had a guy reach out last week. He said, ‘I want to be honest — I’m looking for a job. My wife and I went all in.’ He was working at a big private equity firm in LA as an operating partner. They went all in on a business and it failed. Now they’re bankrupt.”
The allure of PE — systematic, data-driven, institutional — conceals how much individual deals depend on luck in the early years. Brent cited a conversation with Warren Buffett: “I said, ‘Tell me about Sanborn Maps and Dempster Mill.’ He said, ‘Oh my gosh — if either of those investments go wrong, there is no Warren Buffett. No one knows about Berkshire Hathaway. None of that stuff happens.’”
Survivorship bias in PE is extreme. The visible operators are the ones who got lucky early, then built on that foundation.
See also: permanent-equity, brent-beshore, holdco-model, roll-up-strategies, sba-loans, acquisition-entrepreneurship, boring-businesses