Leslie Frecon was a trailblazer when she rose through the ranks to senior vice president of corporate finance at General Mills in the early 1990s. She left after 20 years to open her own private equity investment in 2001 and focus on women-owned businesses.
Frecon is always innovating in its LFE capital at Wayzata.
Stifel Financial, the large St. Louis-based brokerage and financial services firm, invested in LFE and is now a minority shareholder. Additionally, Stifel is investing in Frecon’s fourth fund, which it expects to grow to $100 million.
This is important as it allows the LFE to add investment staff. And its fourth fund should be bigger than the previous three combined.
“Raising capital for the small number of women-led private equity firms like LFE remains a challenge,” Frecon said last week. “This is due to the small size of the funds, the constraints of institutional investors and the lack of women in decision-making positions.
“Stifel recognized the market opportunity as well as LFE’s track record and capabilities. And leveraging their national capital, expertise and networks will enable LFE to extend its reach and impact.”
Stifel declined to quantify the investment, but the financial giant has capabilities. Stifel reported improved net profit in 2021 of $252 million on record revenue of $4.7 billion.
Frecon invests – typically up to $7 million – in women-led businesses with revenues of $2 million to $20 million and focuses on technology products and services in the health and wellness sector.
The performance of LFE patients was superior. The company has achieved cash returns of 3.5 times the invested capital over the years.
The firm is one of the oldest in the nation’s small niche of women’s investment firms supporting female entrepreneurs.
“We are committed to LFE Capital’s mission to expand access to capital and networks to facilitate the continued success of the businesswomen community,” said Victor Nesi, Co-Chairman of Stifel and Head of its Institutional Business. , in a January statement. “We admire Leslie’s foresight and tenacity.”
According to PitchBook and other sources, women-owned businesses only receive 2% equity from venture capital and private equity firms.
However, research from the Boston Consulting Group shows that women-owned startups generated twice as much revenue per dollar invested and 10% more in cumulative revenue than all startups over a recent five-year period.
For Frecon, the investment gap is easy to explain.
“There aren’t enough female decision makers in private equity firms,” Frecon said. “Supporting female-owned and managed fund advisors is key to addressing the issues, as these funds provide scarce capital to growing women-led businesses.”
Frecon has a good sales track record — one of the reasons her company secured the partnership with Stifel, she said.
“We sell our businesses for three to eight times their income,” she said. “This is a great return for LFE’s shareholders and limited partner investors. We are passionate about the health and wellness market, and women are starting a large percentage of these businesses.”
LFE is also licensed by the Small Business Administration as a small business investment firm, allowing banks to invest in both the company and its funds. This includes the banking units of Wells Fargo, BMO Harris, American Express and Morgan Stanley.
Avant Healthcare has faced several challenges, including the Great Recession and Trump-era immigration restrictions. But the company persevered, performed and ended up with a great payday when it was acquired several years ago,
Other current and past holdings include names such as Inlet Medical, Halo Innovations and Wellbeats.
“These technology-embedded companies move faster and have higher margins,” Frecon said.
In 2019, LFE invested in Minneapolis-based Peace Coffee.
Peace Coffee is a fair trade coffee company started by a nonprofit in a basement years ago. It was bought in 2018 by longtime CEO Lee Wallace and investor Kent Pilakowski, now an independent adviser who had served as a marketer at General Mills.
Wallace shut down the higher-cost, slower-growing cafe business, a strategy accelerated during the pandemic, to focus on double-digit growth since 2019 in wholesale and direct consumer businesses.
“Everyone has been drinking coffee at home since the pandemic,” Frecon said. She did not expect such explosive growth when she invested. “It’s a fabulous, premium brand that is growing rapidly under Lee, a great CEO and a fabulous management team.”
LFE Capital isn’t the only women-led equity group in town. CEO Cathy Connett’s Sophia Fund has invested more than $10 million in early-stage startups led by women. LFE has collaborated with Sophia on prospects and agreements over the years.