Investors Looking for Small Firms with Growth Potential A new private equity fund plans to target its investments in small and mid-sized federal contractors. “It is a target-rich environment,” said Rick Knop, co-manager of FedCap Partners LLC of Reston, VA, in an interview with the newspaper Washington Technology. In announcing that it had closed its first round of funding, FedCap said, “The objective of FedCap is to invest in and partner with small and middle market Federal services and technology companies who are positioned in growing areas of the Federal budget and whose owners desire growth capital and advice from industry leaders. FedCap plans to make both minority and majority equity and debt investments and provide advice from industry experts to enable the Fund’s portfolio companies to become attractive targets for acquirers.” The investment group is interested in contractors with less than $50 million in annual revenue. It said those companies are being squeezed by the credit crunch and by SBA’s recertification rule. That rule, effective in 2007, requires contractors to recertify their small business status after a merger or acquisition, and every five years on long-term contracts such as GSA schedules. If the company is no longer small, agencies cannot count its contracts toward their procurement goals. The rule “has made it much more difficult for companies with 20% or more in ‘set-aside’ revenue to sell and receive fair market value for their businesses,” FedCap said. The fund plans to take both majority and minority stakes in companies, with seats on the board of directors. Knop was formerly principal owner of the Windsor Group, an investment bank that was acquired by BB&T Capital Markets. His co-manager and wife, Leslee Belluchie, has been an executive with IBM, CSC and SI International. FedCap’s advisory board and investors include former deputy secretary of defense Gordon England; Russell Ramsey, co-founder of the investment bank Friedman, Billings, Ramsey; Maj. Gen. Robert A. Harding, former deputy intelligence chief of the Army; Walter Batson Jr., co-founder of Camber Corp.; and others with long experience in the federal contracting industry.