As we celebrate Black History Month, PE Hub is featuring interviews with private equity professionals who are Black. Today, we are featuring a Q&A with Tarrus Richardson, founder and CEO of IMB Partners, a Bethesda, Maryland-based private equity firm that focuses on utilities and government contracting.
IMB stands for Investors in Minority Businesses, Richardson told PE Hub in a previous interview. “We are intentional and unapologetic about trying to find ways to build, buy and/or grow minority or women-owned businesses.”
Over the last couple of years, PE firms have talked a lot about making the industry more inclusive for people who are Black and/or members of other under-represented groups. In your view, how are PE firms doing when it comes to diversity, equity and inclusion? If you had to give the industry a letter grade on this today, what would it be?
It’s difficult to assign a letter grade to diversity, equity and inclusion for PE firms. The conversations are happening, but the data and industry reports show a need for a more progress. I have been an inclusion advocate for years, and since the murder of George Floyd, I participate in more conversations about inclusion in professional circles. There are more initiatives and organizations meeting to address DEI within the industry, and steps are moving in the right direction. But we know the industry struggles to grow the representation of ethnic and racial minorities, gender minorities, members of the LGBTQ+ community, as well as individuals raised in low-income households. The needle will start to move when recruiting delivers more diverse groups of junior and senior PE professionals. That’s something we prioritize at IMB and where we hope to see the industry land.
What’s the biggest mistake PE firms make when it comes to under-represented groups?
There are absolutely ways to be thoughtful about recruiting and retaining under-represented talent. PE firms must look outside their own limited circles for new hires; there is tremendous talent available from non-traditional industries. If an employee feels that they are the only one representing a minority group, it is difficult to retain that employee and support them in doing their best work. Inclusion must go deeper than the first hire. The recently published McKinsey.LeanIn research highlights several especially relevant points about this for Black women.
What are PE firms doing right?
I have been encouraged by firms that are actively addressing diversity and implementing solutions for change. Scholarship programs like NAIC, Avante and AltFinance are an incredible first step to identify young talent from different industries and backgrounds. MLT, the Toigo Foundation, and SEO have delivered superior candidates to our best business schools and therefore into internships and associate programs on Wall Street. Firms are also making strides towards accountability by tracking and reporting DEI data, looking internally to determine if their culture enables everyone to succeed, and reviewing supply chains and vendors to drive income to minority-owned businesses. These are important building blocks for a more equitable industry.
It’s Black History Month, and PE Hub is showcasing Black leaders in private equity. Please tell us about someone you admire.
The people I admire most in this industry are leaders who have built firms from the ground up, investing in great teams while also giving back to their communities – people like Frank Baker at Siris Capital, David Grain at Grain Capital Management and Robert Smith at Vista Equity Partners, for example. This ethos has been a throughline in my personal investing story, and a model that I’m working to emulate as I build IMB Partners.
As a private equity investor who is Black, are there any experiences or insights you want to share with PE Hub’s audience?
My partner and I have been in the private equity business for over 40 and 25 years, respectively. Separately, we have co-founded three successful private equity funds with over $500 million of equity and collectively, at IMB Partners, we have invested in eight platform investments with over $70 million of equity in the last eight years. However, we are labeled a first-time fund because IMB Partners has not raised a fund as a firm, despite the partners at IMB having raised funds in the past.
If diverse professionals and investment firms are to succeed, the PE marketplace will need to go beyond recruiting at the traditional firms and schools and do the work to value the experience and track records of proven fund managers. Many diverse fund managers have used outside-the-box thinking to find investment opportunities, and the industry should get comfortable with looking in non-traditional spaces to find great talent and above market returns.
Do you have any advice for PE firms that want to recruit, retain and develop private equity professionals who are Black?
Once employees are brought on, the work begins. Mentorship opportunities and sponsorship relationships should be confirmed – both inside and outside the firm. This is critical for empowering minorities to establish relationships that will help them thrive in their careers. Listening to the experiences and needs of your talent and being open to new ways of operating, raising money and driving growth is an investment in the individuals you hire, and ultimately an investment in your firm.