Fundless sponsors (or “independent” sponsors) operate similarly to private equity groups in how they acquire, hold, and manage businesses, but without dedicated capital. They source capital on a deal-by-deal basis, which adds complication to how deals are structured and makes them far less likely to close. It is estimated that only one in ten fundless sponsor deals close after a signed letter of intent, compared to around a quarter of deals generally. Typically, fundless sponsors come in two flavors, with the first being former private equity staffers.
