The SBIC program is a cornerstone of U.S. private capital, blending SBA leverage with private investment to back lower middle-market businesses, the backbone of the economy. Structured as pass-through entities, SBICs offer tax advantages, CRA credit, and fewer regulatory hurdles, while providing flexible financing for founder-led, family-owned, and underserved companies often missed by traditional PE and credit markets.
In this paper, we explore the top ten SBIC funds in California launched since 2020, highlighting their strategies, trends shaping the market, and key takeaways for GPs and LPs.
Top SBIC Funds in the West (2020s)
1. HCAP Partners V, L.P.
2. Hercules SBIC V, L.P.
- Fund Size: $262,500,000
- Vintage Year: 2024
- Strategy: Venture
- Style: Private Credit
- Location: San Mateo, CA
- Managed by: Hercules Capital, Inc.
- Contact: Scott Bluestein
3. Hercules Capital IV, L.P.
- Fund Size: $262,500,000
- Vintage Year: 2020
- Strategy: Balanced Venture
- Style: Hybrid
- Location: Palo Alto, CA
- Managed by: Hercules Capital, Inc.
- Contact: Seth H. Meyer
4. Caltius Partners VI (SBIC), L.P.
- Fund Size: $249,090,000
- Vintage Year: 2022
- Strategy: Mezzanine
- Style: Hybrid
- Location: Los Angeles, CA
- Managed by: Caltius Management, LP
- Contact: James B. Upchurch
5. Avante Capital Partners SBIC III, L.P.
- Fund Size: $253,882,884
- Vintage Year: 2021
- Strategy: Mezzanine
- Style: Hybrid
- Location: Los Angeles, CA
- Managed by: Avante Capital Partners
- Contact: Clifford A. Lyon
6. Champlain Capital Partners IV, L.P.
- Fund Size: $224,997,320
- Vintage Year: 2023
- Strategy: Hybrid Debt/Equity
- Style: Hybrid
- Location: San Francisco, CA
- Managed by: Champlain Capital Partners
- Contact: Dennis Leary
7. True West Capital Partners Fund III, L.P.
- Fund Size: $222,752,532
- Vintage Year: 2020
- Strategy: Mezzanine
- Style: Hybrid
- Location: Los Angeles, CA
- Managed by: True West Management Company LLC
- Contact: Steven R. Wilkins
8. Silver Lake Waterman Fund III-S, L.P.
- Fund Size: $175,000,000
- Vintage Year: 2022
- Strategy: Direct Lending
- Style: Private Credit
- Location: Menlo Park, CA
- Managed by: Silver Lake Waterman Management Company, LLC
- Contact: Thomas Conneely
9. St. Cloud Capital Partners IV SBIC, L.P.
- Fund Size: $132,945,000
- Vintage Year: 2022
- Strategy: Mezzanine
- Style: Hybrid
- Location: Los Angeles, CA
- Managed by: St. Cloud Capital, LLC
- Contact: Kacy Rozelle
10. Avante Capital Partners SBIC III-A, L.P.
- Fund Size: $138,558,968
- Vintage Year: 2021
- Strategy: Mezzanine
- Style: Hybrid
- Location: Los Angeles, CA
- Managed by: Avante Capital Partners
- Contact: Clifford A. Lyon
Ranked Insights for GPs
- Strategy Differentiation – Western SBICs show strong diversity across strategies: venture-focused giants like Hercules and Champlain emphasize tech-enabled growth and innovation, while mezzanine-focused firms such as Caltius, Avante, and True West blend subordinated debt with equity kickers. This contrasts with other regions (South/Midwest), where mezzanine dominates. The West’s mix of venture, growth, and hybrid capital differentiates it as the most innovation-oriented SBIC region.
- Repeatability & Track Record – Many top players are serial fundraisers with long-standing track records: Hercules Capital (multiple SBIC vintages), Avante (III and III-A back-to-back raises), and Caltius (over two decades of mezzanine experience). Repeatability underpins SBA confidence, making these GPs reliable access points for LPs seeking stability in a high-growth region.
- Deal Size Specialization – Funds such as Hercules SBIC V ($11M+ avg investment) and Champlain IV ($14M+ avg) are skewed to upper-lower middle market/early middle-market deals, while others like True West ($3.7M avg) and Avante III-A ($3.2M avg) focus on smaller, founder-led businesses. This range allows LPs to match capital to niche exposures, from tech-driven growth equity to traditional mezzanine buyouts.
- Ecosystem & Geography – California dominates the Western SBIC map (Los Angeles, San Francisco, Palo Alto, Menlo Park), creating proximity to innovation clusters (Silicon Valley, LA tech/media, Bay Area growth companies). This geography aligns with SBICs’ strengths: bridging venture and private credit for tech-heavy, often capital-intensive companies underserved by banks.
- Capital Formation & Scaling – The West boasts multiple $200M–$260M+ funds (Hercules, HCAP, Caltius, Champlain, Avante), signaling scale that enables participation in larger syndicated deals while still maintaining SBIC flexibility. The SBA leverage model supports these funds in balancing downside protection (debt) with equity upside optionality.
- SBA-Driven LP Advantages – Western SBICs are attractive to banks and institutions seeking CRA credit through impactful financing in innovation ecosystems. They also benefit from tax efficiency and the SBA’s leverage enhancements, which amplify returns on smaller deal sizes. Given the heavy tilt toward venture and growth strategies, SBA participation effectively derisks exposures in some of the riskiest asset classes (tech, life sciences, media).
SBA, SEC, and Congressional Developments
SBA Changes
- IDG Rule in Effect: Introduced Accrual Debentures (equity-focused) and Reinvestor Debentures (fund-of-funds), aligning SBICs with modern private capital strategies.
- Proposed Amendments: Streamlined licensing for follow-on funds and reduced barriers for investments in strategic sectors (e.g., critical minerals, tech).
Congressional Legislation
- Expanded Accredited Investor Definition: Bills like the Fair Investment Opportunities for Professional Experts Act would allow accreditation based on certifications or knowledge exams, expanding the LP pool.
- Investing in Main Street Act: Raises bank SBIC investment caps from 5% → 15% of capital, unlocking billions in new institutional capital.
- Investing in All of America Act: Incentivizes SBICs to invest in rural/low-income areas by exempting those deals from leverage caps.
SEC Changes
- Private Fund Rules: New reporting and disclosure requirements (fees, expenses, performance) increase compliance burdens for private fund advisors.
- Retail Access: SEC guidance removed the 15% cap on closed-end fund allocations to private funds, signaling greater openness to retail participation.
Conclusion
The SBIC landscape is shifting rapidly. SBA reforms are adding structural flexibility, Congress is considering measures that could unlock new capital and direct it to underserved sectors, and the SEC is lowering barriers to retail participation while raising transparency standards.
For GPs, success will hinge on clear strategy and disciplined fund progression; for LPs, broader access will come with higher due diligence demands. Together, these changes reinforce the SBIC program’s role as a vital bridge between policy priorities and private market innovation.
