New Catalyst Strategic Partners chose its name intentionally. “New Catalyst” means that the investment firm catalyzes fund managers’ ability to grow business. It also catalyzes the corporate finance industry by putting managers of “all shapes and sizes” into business. 

“It’s really, really important that we practice what we preach,” says Demetrius Sidberry, the firm’s managing director and investment committee member. New Catalyst Strategic Partners focuses on the “next generation” of managers, particularly in the private equity space. In this conversation with hosts PJ Harris and Abdul-Rahman Lediju, Demetrius discusses the firm’s strategies for investing and guiding growth.

Connect and Learn More

☑️ Demetrius Sidberry | LinkedIn

☑️ New Catalyst Strategic Partners | LinkedIn

☑️ PJ Harris | LinkedIn

☑️ Abdul-Rahman Lediju | LinkedIn

☑️ McGuireWoods | LinkedIn | Facebook | Instagram | X | YouTube

☑️ Subscribe Apple Podcasts | Spotify | Amazon Music  

This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

This is Accessing the Pipeline, a podcast for Black professionals in private equity and finance brought to you by McGuireWoods. Each episode features specials guests offering insights into accessing capital, developing and expanding relationships, opportunities, and driving growth for Black-owned businesses. Tune in to access the possibilities.

Welcome to Accessing the Pipeline. My name is PJ Harris, and I'm an M&A and corporate associate here at McGuireWoods. Please join me and McGuireWoods Partner Lediju in welcome our guest Demetrius Sidberry of New Catalyst Strategic Partners.

Before we get started, I want to give my cohost a chance to introduce himself.

Thank you, PJ. Good morning, and good morning to Demetrius. Good morning to all our guests.

As PJ said, my name is Abdul Lediju. I'm a partner in the corporate and private equity department at McGuireWoods focused on investment funds, fund formation, and working with investors that actually commit capital to investment funds and other pooled investment vehicles.

Again, it's our pleasure to have Demetrius here on the podcast. Demetrius, welcome.

Thank you. Happy to be here.

Happy to have you. Demetrius, let's start by talking a little bit about your background, and specifically how and what led you to your current role at New Catalyst.

No, happy to go into that. I want to start off by, again, thanking the two of you for having me on, and McGuireWoods more broadly. I've listened to a number of these podcasts and you've had some really impressive guests on, so I know I have some big shoes to fill. Again, it's an honor to be a part of this.

As far as my background, I have close to 20 years of experience. Most of it in finance in some shape, or form, or fashion. Corporate strategy, corporate finance, principle investing is where I spent most of my time. But also in product strategy and investor relations. I've seen the gamut of different things within the private equity and private markets context.

My career actually started in investment banking, which is not atypical for folks who are in the seat that I'm sitting in today. I did three years at UBS Investment Bank as an analyst. Then I moved onto a firm called ICV Partners, which as many may know, is a diverse-led manager. And frankly, one of the longer-standing diverse-led managers out there. It was an amazing, amazing experience for me. In some ways, being a part of New Catalyst is coming full circle. That was my introduction into private markets. It's a diverse-led management of team and firm, an emerging manager at the time. I cut my teeth in private equity at an emerging manager. Then after that, I moved onto a firm called Hamilton Lane.

This is where the story gets a little different, in terms of the different things that I have been able to do in my career and have been fortunate to have exposure to. Because it was the first time when I actually worked with the senior leadership team at Hamilton Lane on the IPO of the company after spending a number of years as a part of their direct investment team, which is co-investments for all intents and purposes. But I was tapped to work with the senior leadership team at Hamilton Lane and take the company public. At the time I was like, "This is very exciting." I was the project manager and working very closely with some people that I have an incredible amount of respect for and are well-respected throughout the industry.

What they said to me after the firm went public, or while the firm was going public, they asked me to be the head of investor relations. The CEO at the time, Mario Giannini said to me, "You will actually know more about investing and certainly more about the private market space if you actually continue to work with us as the head of investor relations for this company, as we get out and we tell the story to the market of a differentiated way of investing in private equity."

For those of you who don't know, Hamilton Lane is multi-manager. They have a number of lines focused on investing in private markets. Most of it is investing in funds. But there's a part of the business, again, where I focused on direct equity. That's also a very large business for them. Despite the fact that I've worked on that platform for a long time and seen a lot of deals, I actually got a tremendous amount from working on the firm's IPO, and then being the first head of investor relations.

Which, PJ, to your question, what led me to New Catalyst is all of the different things that I've done throughout my career which has been nearly 20 years. And getting to a point where I knew more than just investing in a company, and understanding leverage profile, and understanding valuations. It's understanding the business of the business of private equity. I think being a part of Hamilton Lane going public was a very, very important moment for me that happened several years ago. But it was very important for me because it gave me a much better understanding of the framework that goes around private markets' companies and what markets them such a specialized set. When we get into what New Catalyst is focused on, hopefully folks will understand why that's relevant.

Yeah. No, that's great. I appreciate that. I appreciate you going into the breadth and the depth of your considerable experience in private equity and investment banking.

I'm curious for our listeners, a lot of whom are emerging managers, would you consider the Hamilton Lane experience one of your earliest successes that indicated that you were on the right path? Was there something that came before that that put a light bulb off for you?

I think another way of thinking about the question is pinch me moments. I've been fortunate to have a lot of those.

Frankly, one of the things I left out of my story that I would be remiss if I didn't mention is I'm a graduate from University of North Carolina Wilmington. If you think about Wall Street firms and the fact that I started my career at UBS Investment Bank, that's not a target school. How did I get their? I got there, a program called SEO. At the time, I think it was Sponsors for Educational Opportunity. Now it's Seizing Every Opportunity, which I think is a great way to frame what the organization does, which is it gives people of color a launching pad for opportunities on Wall Street. If you look around, a lot of analyst classes today and over the last 20 years, SEO is responsible for that.

I think as an intern, 20-plus years ago in SEO, and just being in awe of the fact that I was sitting on a training floor in New York for a large investment bank coming from the school that I got a wonderful education. But again, you don't see a lot of people end up on Wall Street from there. Was the first sign that, one, is was in a very competitive environment and one where you continue to learn. But number two, I was also fortunate enough that, from the mentorship that I got from SEO and that being programmatic, every stop along the way, I've had one, two, multiple people who are always looking to me to help. That stuck with me throughout my career.

I felt like it was a place that wanted me. That was reinforced by the fact that there were a lot of people to help along the way. I've had many moments throughout my career that have been pinch me moments. Certainly, the IPO at Hamilton Lane was one of them that was, again, pivotal in terms of the decision I made to move on to New Catalyst. But I've been fortunate, again, to have several throughout my career.

I really like framing it as a pinch me moment. That early exposure to what's possible is so critical for people to attain the levels of success, and experience, and impact that you have.

I'd like to turn it over to Abdul now, to dig in a little bit more to New Catalyst itself.

Yeah, sure. Thanks, PJ.

Demetrius, thanks for your overview of who you are and how you have arrived at this moment. Let's dig into New Catalyst for a bit. Can you talk more in-depth about who New Catalyst is, what your firm is about? What's the origin story and what's your investment thesis?

No, happy to and appreciate the platform to do that.

The reality for New Catalyst, we launched earlier this year but it's been in the making for a long time. I'd say 10-plus years at least. The reason for that is my partner, and the founding and managing partner for the firm, Jason Howard, who a lot of people know in the emerging manager space, was the head of the diverse managers business at GCM. And made a lot of in-roads while he was there, and did a great job with that program and platform. But he ultimately saw that there was a more strategic way that we could help managers if you had the right platform, and an independent platform that didn't have other parts of the business that it needed to feed. I can give you a little bit more color on that.

The bottom line is New Catalyst is a seed and growth capital investors and what we call next gen managers. Funds one through five. Mostly focused on funds one through three, but certainly the ability to invest in more mature managers that still have the same needs or evolving needs that many new managers have. What we do is we invest anywhere from 50 to $75 million into the manager, a lot of it in the form of LP commitments. But we can also do working capital and co-invest capital. In addition to that, we're providing an intensive operational value creation playbook to help those managers build their business.

Really, the notion of New Catalyst is that private equity firms, private markets firms are businesses too, and they should be capitalized as such even though historically that hasn't been the case. Bringing the two together, Jason spending time over the last 10-plus years, close to 14 years at his prior firm really building a lot of relationships and in-roads in the market, having some success, some lessons learned for those managers.

Me starting at an emerging manager and then spending time at Hamilton Lane focused on the small to medium-sized direct deal space for a lot of the time that I was there, it made a lot of sense when Jason approached me and said, "Hey, I'm thinking of a day way of investing in next gen managers. I have a great partner." Which turned to be Apollo, at the time he was still working through his agreement to get us off the ground. We can go out and we can affect a lot of change in the market, investing in next gen managers providing them with meaningful capital so they can go out and do deals, and catalyzing them to go out and do deals. But then also helping them build the infrastructure around the investment engine, and do that in a much more efficient manner.

That's what New Catalyst is focused on. We're an investor in early stage managers, particularly in the private equity space. They're early days, funds one through three predominantly, and the ability to invest in groups that are a bit further along in their evolution as well.

Yeah. No, that's a fascinating origin story. Thank you for sharing.

You talked about a unique value creation playbook. You just talked about you, and Jason, and the team wanting to bring something different to the market. Can you talk about what's unique about New Catalyst's approach to sourcing partnerships with next gen managers? And can you maybe talk a bit about how do you uniquely create value for these partners?

No, absolutely. Some of it is going to be repetitive to what I just said. Which is, I'll frame it differently, time and experience in the industry.

The way that I frame our strategy at New Catalyst is that it's still a manager's selection strategy. We're LPs, in terms of having a meaningful exposure to managers in their first fund. But then we're also thinking about the business context of it, and how do you scale that business over time. Because we, in exchange for that meaningful amount of capital and the value creation, which I can talk about in a second, we'll have an ownership interest in the GP in the form of a revenue share. We are bringing something to the market that is differentiated in terms of how we think about investing in those managers and what we get for that.

And the time in market. The fact that I've been in and around the emerging managers, again, the mid-market space for the last 15 years of my career. Jason, along the same timeline. And very, very focused over-indexing to that part of the market.

Abdul, you know this, relationships. Everyone says it, but relationships in the smaller part of the market, both on the LP and GP side, matter a ton. You don't want to show up to a meeting for the first time and no one knows who you are. Or go to an LP and have a discussion, or to a GP, and they don't know what your history is investing in and helping catalyze managers. This team has that. This is just repackaging that expertise and putting it in a more strategic form, particularly around the value creation but also the scale of capital that we can invest.

I've talked about Jason and myself, but we have others on the team that have been executing on components of the strategy as well. We have two guys on our team, James and Curtis, who have a GP stakes and seeding background. Which in a fairly nascent market, they don't grow on trees. Then we have someone on our team named Alice who has a secondary background, so understanding. When I talk about that fund four or fund five opportunity set for us as well, so not just fund ones, having someone who understands what it means to underwrite an existing portfolio, or help our managers down the road as they set up secondary strategies or use secondaries as a portfolio management tool. All of that to say is from an underwriting standpoint and a familiarity in the market, we feel like we bring a lot to the market.

The other piece on the value creation side is really thinking about this disconnect between being a strong investor and being a strong business owner. And the fact that the two are not one and the same. That's okay, because if you've never run a business before, you just don't know some of the ills associated with doing that. Our job is to make that transition as easy as possible. We do it in a variety of ways. We're focused on just basic business building, we're focused on capital formation which is at the top of most people's list. And then we also think about talent.

One of the things that we'll say private equity firms, private markets firms more generally, have started to focus on but there can be greater focus particularly with the smaller managers, is how do we create recruit? First and foremost, get the right people on the team. But how do we develop them over time? We think about all of those different areas in the context of building a business, and allowing the team that is a part of that business to drive the investment engine but have some real support in the business building context. Which we think is really, really helpful in driving efficiency and those folks getting to their best and highest use as soon as possible.

I think you mentioned a variety of tools, capital tools that you put to work to support next gen managers. If I were an emerging manager, if I were a GP, a young GP, what are some of the things you would look for? What are some of the qualities you would look for in me, and say I have a team, in my team? What are some of the check-the-box?

I don't think any of this is going to be surprising to you, Abdul. At the end of the day, as I said earlier, this is a manager selection strategy. When people think about that as what's your experience?

First, we'll happily and we're going to support many first-time funds, but not first-time investors. Showing up that they have an idea, but you haven't necessarily executed on an idea in the context of a principal investor, that one's challenging. What we're looking for are people that have a great amount of experience investing, that have a strong track record. Whether they get it attribution for it, or it's portable or not, we can figure those things out. But certainly, you're showing up with an idea that you've executed on before or a version of that that we believe is repeatable.

The team is important as well. Team continuity. How do you think about does the person have the right mindset in terms of how they want to incentivize and motivate the team over the longer term? When private markets firms have broken down even with strong track records and performance, it's often because the people can't figure out whether it's economics, or whose got the loudest voice around the table, et cetera. Being thoughtful around how you're constructing your team early days, and potentially getting ahead of some of those pain points, is really important as well.

Are you differentiated? Are there hundreds of other managers out there telling a very similar story? If so, what makes you unique? We're seeing value creation. How do you think about exiting your investments? Maybe it is your track record. Maybe you have a track record that's out of this world, and therefore people are going to gravitate towards whatever you're doing is working and let's focus on that. But I think a lot of it ties to do you feel like you're partnering with someone who can drive strong returns? Again, stating the obvious, but thinking about it over the longer term and making sure they're incentivizing their team the right way to continue to build their business.

I think if you're a regular LP, you're thinking about those things. The right culture, the right investment strategy, differentiation in your portfolio. But then when you're a seed investor and you're looking for additional economics in the manager, you also have to think about that business building piece. Are you a manager that's looking to raise a fund, or are you looking to build a firm? Those are two very different things. We try to suss that out in the discussions that we're having. But if you're a manager coming to us, know your story. Make sure you understand your track record, understand your peers. How are you differentiated?

We're set up to dig deep and help you figure some of those things out. It doesn't have to be perfect. But what we're trying to do is get you ready for primetime. And as you go out and you have other discussions with LPs, you're more buttoned-up on those things. But those are some of the baseline things that we're looking for in terms of what's going to drive success in a new private markets firm.

Yeah. No, that's great. I think what you and your team are doing is partnership in the purest form in the emerging manager ecosystem. The focus on not only the product, which are funds, but also the firm itself, and coming in with that dual, double-barrel approach to build 10-year or 20-year relationships. This is really, again, partnership in the purest form from my perspective.

What advice do you have for hungry emerging managers that may be seeking this kind of partnership? When they're looking for someone that's not just going to anchor a fund, but have an eye toward partnering at the firm level as well?

Yeah. All of the stuff I said for your last question applies here.

I'd say the other thing that most managers, and frankly even some more experienced managers don't do is they don't study their audience. And understand that not the same pitch, the same story doesn't work for every group that you're encountering. I would say become more listeners than talkers in certain situations, and you'll be surprised. And be very strategic around who you're putting in the room as you're facing off and having discussions with LPs. But make sure you're listening for what they really care about.

I think we push with seed investors for regular way LPs, we push the GPs that we're having conversations with to be thoughtful around that audience piece. Because at the end of the day, what you're solving for is not the same thing for every single LP.

The other part is I think you really, really need to have that business building mindset. It's okay to come in and say, "This is what I know and this is what I'm really great at, and these are the responsibilities that I had at my prior firm that rhyme with business building. I need help in these areas." I think being very transparent around your strengths and your potential blind spots is really, really helpful because I would argue that the partnership starts in that first conversation, and not necessarily when you have a term sheet signed.

What we're trying to figure out is can we be helpful? We know that 50 to $75 million is really helpful. Let's not under appreciate the capital piece of the equation. But then the other stuff is where we're trying to figure out is this the partner that we want? Can we really lean into the value creation with them? And can we be helpful in areas that we've seen as we're building New Catalyst, we've seen over the last 15 years in the private markets play out from different vantage points? We want a partner that's ultimately going to be a good listener.

Going back to the point that I made earlier, know your audience. Know what's interesting to them and see if that's something that aligns with what's interesting to you and where you could potentially drive execution.

Absolutely well said. Thank you for that, Demetrius.

Really appreciated that discussion as well. It just shows that New Catalyst is practicing what it preaches in terms of thinking about the way that you're differentiated in the same way that you would advise emerging managers to be conscious and thoughtful about the way they're differentiated. It sounds like you guys are always thinking about, "Well, how can we be a value add in a different way" for the community of partners that you're working with.

McGuireWoods is focused on promoting the progress of Black professionals in private equity, finance, entrepreneurship, especially those who are committed to making a positive impact in the communities that they serve. We recognize and have discussed that New Catalyst has a diverse and purpose-built management team. Wanted to drill into whether that was an intentional imperative of yours. I think you've discussed already that it was. But just wanted to give you an opportunity to talk about why that's important to New Catalyst.

I think it's a really, really important question. The short answer is it's intentional. There's a great degree of intentionality around how we're building our team. But it cuts across not only racial, ethnic, gender diversity, but also diversity in experiences. Our view is not dissimilar from how we think about the GP side of the equation, where we say we're inclusive of diversity, not exclusively focused on diversity. Our job is to find best ideas. But we happen to appreciate, understand, and frankly have been the beneficiaries of a lot of those best ideas happen to also have diverse representation leading them. I think that's been a healthy mindset for us as we've gone out and built the team.

I alluded to this earlier. If you look at our website, very, very proud of what it looks like. No doubt. However, if you click on the bios and you start to go through, it's like, "Wow, the team has been thoughtful about filling in holes in experience." GP stakes and seeding, secondaries, co-investments with my background, Jason's background in pre-consistence manager selection. Ali on our team, who worked at a large institution in BlackRock, and then joined an emerging manager herself before coming over to New Catalyst. We're trying to figure out a team that can have a lot of different ideas and a lot of different experiences to help our GPs. In return, that'll be a good product for us.

When we think about diversity, it's a high degree of conviction around more diverse perspectives around the table drive better results. What I think we're achieving is making sure you have diverse perspectives across the board. It's been very, very intentional. Look, Jason said to me early days, and it's one of the reasons why I was really excited to join him in this endeavor, was that he wanted to build a dream team. A part of that was making sure you had those diverse perspectives around the table. You'll see the team growing over time. But we feel really, really good about where we are today in having the representation that we do.

Absolutely. Just listening to you, I think the team that's emerging, for me, is just the intentionality of everything that you all do at New Catalyst. And the multidimensional approach even to diversity that you're taking and carrying forward into how you build your team, how your source your partnerships, and identify the emerging managers you want to work with.

I guess my last question is how is that intentionality in that to build your team and your partnerships, how is that working for you over the longterm and why is that important for the ecosystem?

Yeah. Look, I think it's important for the ecosystem because seeing is believing. When I think back to my time in investment banking, I think investment banks with partnerships like SEO and other organizations are trying. But as you think about the matriculation of people of color in various industries, in your field, in the the legal profession but it's certainly in corporate finance as well. You don't look in corner offices and see as many people of color and women as frankly we should. I think for New Catalyst's leadership team, and the broader team to have that diverse representation, and then be responsible for putting managers of all shapes and sizes into business is really, really catalytic for the industry.

The name New Catalyst really has multiple meanings. Some of it's very literal. We want to catalyze your ability to build your firm and a much more efficient manager. That is the core part of what we're doing. But then there's also this broader industry impact that we want to have, and frankly we want others, we need others to have that as well.

The answer to your question is that is really, really important that we practice what we preach. And understand that the reason why diverse candidates or diverse talent is underrepresented in our industry is because it's underrepresented in our industry. You have to create those examples for people to see, to get mentorship from, and know that what's possible. Going back to my point earlier, around what SEO did for me. It's having more organizations like that in different pockets I think will be very, very impactful for the industry over the years to come.

Phenomenal. Thank you.

I just wanted to hit on a point, Demetrius, you shared earlier that came out of one of PJ's questions. I just wanted to call out the intentionality you guys have brought to building your team. The way you've been able to execute on this idea of building a dream team, and going to make with all stars in every position frankly. This is something I suspect this is exactly the kind of approach you expect and demand out of the managers you will be partnering with. You are the definition, I think PJ said earlier, the definition of practicing what you preach. Looking forward to the years to come.

Abdul, I really appreciate you bringing that point out. Because again, that's a part of the reason why we believe in the best ideas approach. Because I mentioned talent as one of the things we're focusing on, that's a part of the talent discussion. The large firms are having that discussion. The smaller firms should be having that discussion as well. I'm appreciative of the fact that you brought that out, so thank you.

No, that's great. Demetrius, thank you so much for your time. With these podcasts, we like to end each episode with something that helps our audience get to know our guest better beyond the professional day-to-day, the buttoned-up professional that they see here and are hearing today.

I wanted to ask you a personal question. What is a book that has been on your mind lately? Either something you've read or something you haven't read and want to. But anything you think merits a mention.

I'll do this shortly, I'll try to be brief on it. There are three books. I'll be very quick on this. Two are incredibly relevant for what we're doing today as New Catalyst.

One is What It Takes by Steve Schwarzman. I'd recommend anybody that's in private equity, private markets in any shape or form, or owning their own business or thinking about it to read that book. It's incredible, the journey of Blackstone and it's evolution, et cetera.

The other one is Black Privilege, which is by Charlamagne tha God. I think many people know he's more than a radio personality. He's been very influential in the Black community and beyond. But he wrote a book that talked about being your genuine self is the best path to success. I think this is at the core of what we're saying at New Catalyst. When we talk about differentiation, a part of it may be your approach in how you source deals because of being your genuine self. How do you bring that out? I think those two books are relevant. I read those over the pandemic, so they're not recent reads.

The book that I'm reading now chronicles a very historically dangerous family in the South. The book is called Devil at His Elbow by Valerie Bauerlein. The reason I started reading the book, I didn't actually follow the story when it was the national news. The reason why I started reading the book is because I sat down next to the author in New York City at a restaurant, didn't know who she was. She was very nice. We started chatting, and then we figured out we were both from Wilmington, North Carolina. We chopped it up a little bit. She had a book. I asked here, "What is the book that you're reading?" It was a book that she had just published that day, Devil at His Elbow.

Oh, wow.

She signed it for me, gave me a copy. I was like, "I have to read this." It's a fascinating read. It's the right way to call it, like a murder mystery or whatever. It's based on a true story. I don't know what that says about me, but that's the book that I'm currently reading. Other than the fact that, when somebody tells me they're from Wilmington, North Carolina, I support them. Great book. I recommend anybody who likes stuff like that to check it out. It's incredibly well-written and I'm enjoying reading it. I haven't finished it yet, but I'll get there over the next hopefully several weeks.

Well, excellent. What It Takes, Black Privilege, and Devil at His Elbow.

Very different books.

That was great. Thanks for that, Demetrius. We really appreciate you carving time out of your busy day, and of course during a busy time of the year. To join PJ and myself to talk about your journey, to talk about New Catalyst. We look forward to hearing about the successes and wins that your firm will achieve in the year and years to come. Thank you for your time.

No, thank you for this. Again, as I said, I've listened to other episodes of this. You guys are doing an incredible job, so I appreciate being a part of this effort.

Thank you, Demetrius.

Yeah. Thank you.

Thank you for joining us on this episode of Accessing the Pipeline. To learn more about today's discussion, please email bpef@mcguirewoods.com. We look forward to hearing from you.