• Direct deal investing led by independent sponsors is growing at a 52.8% compound annual growth rate (CAGR), driven by more experienced sponsors and broader access to capital.
• SBICs, family offices, high-net-worth investors (HNWs), and placement agents are expanding the capital available for deal-by-deal investing.
• Deal-by-deal investing offers asset-level visibility that a blind pool fund can’t, plus QSBS tax benefits and lower middle market IRRs often of 26% or more.

Where Are New Independent Sponsors and Their Capital Coming From?

• More quality independent sponsors are being launched (coming from PE, investment banking/consulting, former operating executives, etc.). The expertise demarcation between fund-less sponsors (who raise capital deal by deal instead of from a committed fund) and funded sponsors is blurring.
• Broader access to capital (SBICs, family offices, dedicated funds that focus on independent sponsor deals, high-net-worth investors (HNWs), etc.). More quality placement agents are focusing on direct equity raises. Leading industry conferences, such as SBIA's Independent Sponsor Forum and iGlobal Forum's Independent Sponsors Summit, offer capital matchmaking.

Deal-by-Deal Investing vs. Blind Pool Funds: What Investors Gain

• Investors love the visibility on the specific asset being acquired (something the blind pool model can’t do). 
• Deal-by-deal investing can offer shorter duration exposure and better tax benefits (e.g., Qualified Small Business Stock (QSBS)).

How Strong Are Lower Middle Market Private Equity Returns?

• Various industry studies show that lower middle market (LMM) private equity deals outperform, with internal rates of return (IRR) often 26%-plus and 2.8x+ multiples. LMM opportunities combine multiple arbitrage (buying at lower valuation multiples and selling at higher ones) with operational enhancements. See the Acquinox article cited below for more deal-by-deal insights. 
• Having trusted accounting and legal advisors who know independent sponsor deals matters.