Gemini Investors

Teaching Note for HBS No. 211-066. Gemini Investors was a private equity firm that targeted equity investments of between $4 million to $6 million per firm. In the period from 2000 to 2015, Gemini had successfully deployed four funds, all licensed as Small Business Investment Companies by the Small Business Administration (SBA). The invested capital of these funds was between $100 million and $160 million. One-third of the capital came from Gemini’s limited partners and the remaining two-thirds came from the SBA in the form of low-cost loans. In 2015, Gemini was about to raise a new fund and had to decide whether its size should be similar to its previous funds or significantly larger. The main drawback of a larger fund was that Gemini would need to reduce its reliance on the low cost leverage provided by the SBA because the SBA’s limit on the total amount of debt it would provide to a given fund. The partners in Gemini had to decide whether a larger fund with less SBA debt financing could deliver the same performance to its limited partners as its previous smaller funds.