THE MOST FAVORABLE SETUP IN PE FOR OPERATORS WHO AREN'T READY TO CASH OUT
Grow.Get Paid onWhere You Finish.
Traditional PE locks your value at entry. We pay you based on where you END. Grow faster, get more. Simple.
This is for focused hypergrowth. If you're targeting 5-10% annual growth, this isn't for you. And that's okay.
THE PROBLEM
Traditional PE Locks You In at Entry
The Coaster
Brings in $500K EBITDA. Grows 10% per year. Collects a paycheck. Exits at $732K EBITDA.
Gets paid on $500K entry value.
The Grinder
Brings in $300K EBITDA. Grows 45% per year. Hustles every day. Exits at $1.33M EBITDA.
Gets paid on $300K entry value.
In traditional PE, the coaster and the grinder get the same deal: 4x their entry value.
That's broken. We fixed it.
THE DIFFERENCE
Traditional PE vs FRDM
Traditional PE
VALUATION
Locked at entry. You get paid on where you START.
MANAGEMENT CARRY
20-30% + fees
FEES
2% annual management fee, transaction fees, monitoring fees
BUILT FOR
Mature businesses that have peaked
INCENTIVE ALIGNMENT
Fees paid regardless of performance
FRDM Collective
VALUATION
Based on exit. You get paid on where you FINISH.
MANAGEMENT CARRY
25% no fees
FEES
Zero. No management fees, no transaction fees, no monitoring fees.
BUILT FOR
Hypergrowth operators who are just getting started
INCENTIVE ALIGNMENT
We only make money when YOU make money
Traditional PE's 20-30% carry plus fees often costs more than our 25% with zero fees.
THE CHOICE
Go Alone or Grow Together?
You can sell your business today for a standalone multiple. Or you can join a portfolio of hypergrowth operators and unlock significantly higher returns. Here's what you get with us.
Go Alone
Lower Multiples
3.5x-7x depending on size. Smaller businesses get crushed.
No Economies of Scale
You pay full price for everything. No shared resources.
Limited Growth Capital
No access to institutional capital for acquisitions.
Isolated Operations
No peer network. No shared best practices. No combined talent.
Broker Fees
8-12% of sale price goes to brokers and intermediaries.
Typical Exit Multiple
3.5x - 7.0x
Based on your EBITDA tier
With FRDM
Higher Multiples
4.03x-9.92x target multiples. +19% to +40% premium over standalone.
Economies of Scale
Shared marketing, technology, and operational resources across 15+ businesses.
Growth Capital Access
Portfolio cash flow funds acquisitions. Future debt for larger deals.*
Operator Network
Learn from 15+ operators. Combined talent. Shared best practices.
Focused Lead Generation
Centralized marketing and lead gen for all portfolio companies.
Small Deal Assistance
Help acquiring smaller businesses and contracts to accelerate growth.
Target Exit Multiple
4.03x - 9.92x
Based on your ending EBITDA tier
*Future debt usage for larger acquisitions subject to portfolio performance and lender approval.
THE FRDM FLIP
Your Floor + Your Upside
Your total payout is based on two things: a guaranteed floor (what you rolled in) plus performance upside (where you finish). The bigger you grow, the bigger your total payout.
Rollover Equity
Your Guaranteed Floor
When you roll in, you receive equity based on your entry valuation (5x your entry EBITDA). This is your guaranteed floor—you get this regardless of performance.
Example: $400K entry EBITDA × 5x = $2M entry valuation
Your share of the rollover equity pool is based on this $2M.
Operator Promote
Your Performance Upside
At exit, you receive additional payout based on your ending EBITDA tier. Bigger ending EBITDA = higher promote multiple. This is where grinders win.
Example: $1.5M exit EBITDA × 4.45x promote = $6.7M
Plus your rollover equity share = Total Payout
How It Adds Up
Rollover Equity
~3.5x
Based on entry value
Operator Promote
2.85x-4.90x
Based on ending EBITDA
= Target Net Multiple
6.35x - 8.40x
vs Standalone: 5.0x-6.25x (+19% to +40% premium)
Floor + Upside = Total Payout
You get a guaranteed floor based on what you rolled in, plus performance upside based on where you finish. Grinders win.
YOUR TARGET RETURNS
Know Your Target Payout
Grow your EBITDA to a tier, and you're targeted to receive that net multiple on your ending EBITDA. Transparent targets. Performance-based outcomes.
| Ending EBITDA Tier | With FRDM* | Selling Alone | Your Premium |
|---|---|---|---|
| $0K - $400K | 4.03x - 4.27x | 3.5x | +19% |
| $400K - $500K | 4.68x - 4.92x | 4.0x | +20% |
| $500K - $600K | 5.08x - 5.32x | 4.3x | +22% |
| $600K - $700K | 5.43x - 5.67x | 4.5x | +23% |
| $700K - $800K | 5.83x - 6.07x | 4.8x | +25% |
| $800K - $900K | 6.23x - 6.47x | 5.0x | +27% |
| $900K - $1.00M | 6.58x - 6.82x | 5.3x | +28% |
| $1.00M - $1.25M | 6.98x - 7.22x | 5.5x | +29% |
| $1.25M - $1.50M | 7.43x - 7.67x | 5.8x | +31% |
| $1.50M - $1.75M | 7.83x - 8.07x | 6.0x | +32% |
| $1.75M - $2.00M | 8.28x - 8.52x | 6.3x | +34% |
| $2.00M - $2.50M | 8.68x - 8.92x | 6.5x | +35% |
| $2.50M - $3.00M | 8.78x - 9.02x | 6.5x | +37% |
| $3.00M - $4.00M | 8.88x - 9.12x | 6.5x | +38% |
| $4.00M+ | 9.68x - 9.92x | 7.0x | +40% |
*Target Net Multiples assume portfolio exit at 12x or higher. Actual payouts depend on portfolio exit value and available proceeds. If exit proceeds are insufficient, payouts may be reduced pro-rata. Plus potential Performance Bonus Pool share for top growers.
THE MATH
Real Numbers, Real Returns
Example: The Grinder
50/50 Payout Breakdown
Compare: Solo vs FRDM
Solo (6.0x Multiple)
$9.0M
If you sold alone at 6.0x your ending EBITDA
With FRDM (7.95x Net)
$11.9M
Rollover + Promote combined*
+33%
More than selling alone
Why the premium?
• Portfolio sells at 12x (vs 5.5x standalone)
• Your floor is protected (rollover equity)
• Your upside is uncapped (operator promote)
* Target returns assume portfolio exit at 12x. Actual returns may vary based on portfolio performance.
YOUR NUMBERS
Calculate Your Target Payout
Adjust the sliders to see how your entry EBITDA and growth rate affect your target payout. This is personalized to your business.
Your 50/50 Payout Calculator
See your floor + upside based on growth
Rollover Equity (50%)
$5.4M
~3.5x contribution
Operator Promote (50%)
$6.9M
4.45x tier multiple
Selling Alone (6.0x)
$9.3M
With FRDM (7.95x)
$12.3M
+32%
That's $3.0M more than selling alone
*Target payouts assume portfolio exit at 12x or higher. Actual payouts depend on portfolio performance and may be reduced pro-rata if proceeds are insufficient. Rollover equity provides a guaranteed floor; operator promote rewards performance.
TRANSPARENCY
What Needs to Be True
We don't hide the assumptions. Here's exactly what needs to happen for this model to deliver target returns.
We believe in radical transparency. Here are the assumptions that must hold true for this model to deliver target returns. If any of these break down, payouts may be reduced.
Exit Multiple
12x or higher
Portfolio must exit at 12x EBITDA or higher to pay all target tier multiples.
Why: At 12x, enterprise value is ~$216M, generating ~$150M operator pool after preferences and carry.
Risk: At 10x, operator payouts may be reduced. At 8x, significant pro-rata reductions apply.
Portfolio EBITDA
$18.0M net
Combined portfolio EBITDA must reach ~$18M net (after corporate overhead at Year 4).
Why: This EBITDA level qualifies for the 12x multiple tier in the market multiple table.
Risk: Lower EBITDA = lower multiple = smaller pie for everyone.
Operator Growth
40-50% annual average
Operators must grow aggressively—this isn't for 5-10% annual growth businesses.
Why: To reach $20M gross EBITDA from ~$5M starting requires ~40% average annual growth over 4 years.
Risk: If operators coast, portfolio won't hit target EBITDA, reducing everyone's payout.
50/50 Split
Rollover + Promote
Operator pool is split 50% rollover equity (floor) and 50% operator promote (performance).
Why: Rollover provides guaranteed floor based on entry value. Promote rewards ending EBITDA performance.
Risk: If promote pool is insufficient, top-tier operators may see reduced promote payouts.
Hold Period
4 years
Target exit at Year 4, with potential extension up to Year 6 if value-accretive.
Why: 4 years allows operators time to compound growth while maintaining investor liquidity expectations.
Risk: Early exit may not capture full growth. Extended hold may frustrate investors.
Seed Capital
$5.0M
Seed provides 1.50x preference ($7.5M floor) plus 5.0% participation in remaining proceeds.
Why: Without seed capital, there's no runway to support operators and build portfolio infrastructure.
Risk: If seed isn't raised, model doesn't work. Operators would need to self-fund overhead.
HoldCo Overhead
$2.0M/year
Corporate overhead starts at $2M/year and grows 8% annually (~$9M total over 4 years).
Why: Covers management, marketing, shared services, and technology to drive operator growth.
Risk: If overhead doesn't deliver value-add, operators may question the ROI assumption.
Market Conditions
Favorable STR M&A
Short-term rental market must remain attractive to strategic and financial buyers.
Why: Exit multiple depends on buyer appetite. Precedent deals (Monarch, Nocturne) show 10-14x is achievable.
Risk: Market downturn or regulatory changes could compress multiples.
The Bottom Line: Floor + Upside
With the 50/50 structure, operators get a guaranteed floor (rollover equity based on entry value) plus performance upside (operator promote based on ending EBITDA). If we hit $18M net EBITDA and exit at 12x, the model works as designed. If we underperform, the promote pool is reduced first—but your rollover equity floor is protected.
Best Case (14x)
Full payouts + large bonus pool
Target Case (12x)
Full payouts + healthy bonus pool
Stress Case (9x)
Rollover protected, promote reduced
THE PORTFOLIO
15 Operators, One Mission
The Target
We're building a portfolio of 15 operators who are ready to grow aggressively. Target: $216.0M enterprise value at exit.
This requires hypergrowth (40%+ annual EBITDA growth). Those who grow rapidly win. Those who want to grow at 5-10% annually—this isn't for them. And that's okay.
THE WATERFALL
How the Money Flows
Seed Capital (Class A-1) — Hybrid Structure
Seed investors get a 1.50x liquidation preference (first out) plus 5.0% participation in the profit pool.
$17.9M
3.58x return on $5M investment
Series A Capital (Class A-2) — Optional
If raised at Month 18: 1.5x liquidation preference (after seed) plus 3% participation. Lower risk = lower reward.
$15-20M raise
2.0-2.5x target return
Management Carry (Class C)
Management gets 25% of the remaining pool after seed participation. Anti-diluted—never changes. No hidden fees, no management fees, no transaction fees.
25%
Straight line carry, no fees
Operator Pool (Class B) — 50/50 Split
Operators receive 75% of the remaining pool, split 50/50 between rollover equity and operator promote.
$148.6M
75% of profit pool
50% Rollover Equity
$74.3M
Pro-rata by entry valuation
50% Operator Promote
$74.3M
Based on ending EBITDA tier
The Key Insight: Floor + Upside
Seed gets a hybrid return (1.50x preference + 5.0% participation). Management gets 25% (anti-diluted, never changes). Operators get a guaranteed floor (rollover equity) plus performance upside (operator promote). Everyone's incentives are aligned: grow the pie.
EXIT MULTIPLES
EBITDA Drives the Multiple
The bigger the portfolio EBITDA, the higher the exit multiple. We're targeting ~$18M net EBITDA at exit = 12x multiple.
| Min EBITDA | Max EBITDA | Multiple |
|---|---|---|
| $0K | $150K | 1.8x |
| $150K | $300K | 2.5x |
| $300K | $500K | 3.5x |
| $500K | $750K | 4.5x |
| $750K | $1M | 5.5x |
| $1M | $2M | 6.5x |
| $2M | $4M | 7.5x |
| $4M | $5M | 8.5x |
| $5M | $8M | 9.0x |
| $8M | $10M | 10.0x |
| $10M | $15M | 11.0x |
| $15M | $20M | 12.0x ← Target |
| $20M | $30M | 13.0x |
| $30M | $50M | 14.0x |
| $50M | $1B+ | 15.0x |
THE STRUCTURE
How the Shares Work
FRDM Collective uses a three-class share structure that aligns everyone's incentives. Here's how proceeds flow at exit.
ENTERPRISE VALUE AT EXIT
$216.0M
Based on 12x exit multiple
Class A — Seed
3.58x MOIC on $5M
Class B — Operators
75% of profit pool
Class C — Management
Straight line carry. No management fees, no transaction fees, no monitoring fees. Anti-diluted—never changes.
Seed gets paid first — 1.50x preference before anyone else
Management is aligned — Only makes money when you do
Operators get the lion's share — 75% of the profit pool
TAX TREATMENT
83(b) Election: Capital Gains, Not Ordinary Income
Your roll-in is structured for tax efficiency. Here's how it works.
What is an 83(b) Election?
An 83(b) election is an IRS provision that allows you to pay taxes on equity at the time of grant (when value is low) rather than at vesting (when value may be much higher).
For FRDM operators, this means you can elect to be taxed on your entry valuation rather than your exit valuation.
Example: If you roll in at $400K EBITDA (5x = $2M entry value) and exit at $1.5M EBITDA (8x = $12M exit value), you're taxed on the $2M, not the $12M.
How Your Roll-In Works
Section 721 Exchange
Your business rolls into FRDM tax-deferred. No immediate tax event.
Profits Interest Units (PIUs)
You receive PIUs representing your share of future profits. These have $0 value at grant.
83(b) Election Filed
Within 30 days, you file 83(b) to lock in the low basis. Future appreciation is capital gains.
Exit = Long-Term Capital Gains
At exit (4+ years), your payout is taxed at LTCG rates (~20%), not ordinary income (~37%).
Tax Comparison: 83(b) vs No Election
| Scenario | Tax Rate | On $10M Gain | You Keep |
|---|---|---|---|
| No 83(b) (Ordinary Income) | ~37% | $3.7M tax | $6.3M |
| With 83(b) (LTCG) | ~20% | $2.0M tax | $8.0M |
You save ~$1.7M on a $10M gain by filing 83(b). Consult your tax advisor for your specific situation.
We'll Walk You Through It
The 83(b) election must be filed within 30 days of receiving your equity. Don't worry—our team will guide you through every step of the process as part of your onboarding. We'll ensure everything is filed correctly and on time.
For detailed information about 83(b) elections, PIUs, and tax treatment, visit our Resources page.
THE JOURNEY
Your 4-Year Path to Exit
From roll-in to exit, here's what the journey looks like. Key milestones, annual PIU grants, and your path to a life-changing payout.
Roll-In & 83(b) Election
- • Business rolls into FRDM (Section 721 exchange)
- • Receive initial Profits Interest Units (PIUs)
- • File 83(b) within 30 days
- • Entry valuation locked (5x entry EBITDA)
Growth & First PIU Grant
- • Focus on EBITDA growth (target: 40-50%)
- • Access HoldCo resources & shared services
- • Annual PIU grant based on performance
- • Quarterly reporting & portfolio synergies
Series A (If Raised)
- • $15-20M raise for traditional acquisitions
- • 1.5x liquidation preference (after Seed)
- • 3% participation in profit pool
- • Accelerates portfolio growth
Scale & Compound
- • Continue aggressive EBITDA growth
- • Continue acquisitions using business proceeds + debt
- • Position portfolio for optimal exit valuation
- • Annual PIU grants compound your stake
- • Your ending tier multiple becomes clearer
Exit & Payout
- • Portfolio sold at 12x+ EBITDA multiple
- • Your ending EBITDA determines your tier
- • Rollover equity + Operator promote paid out
- • Top growers receive bonus pool share
- • Taxed at long-term capital gains (~20%)
Target: 6.35x-8.40x net multiple on ending EBITDA
Days to file 83(b)
Annual PIU grants
Target annual growth
LTCG tax rate at exit
STRAIGHT ANSWERS
Questions You're Thinking
GET STARTED
Ready to Roll In?
Tell us about your business and growth goals. We'll review your information and reach out within 24 hours to discuss how FRDM Collective can help you grow.
Interested in Rolling In?
Tell us about your business and growth goals
Is This For You?
This is for operators who are ready to grow aggressively. Not 5-10% per year. 40%+.
If you're ready to grind, we're ready to back you. If you're looking to coast, this isn't the right fit.
We want operators who want to win.
Let's TalkEmail: [email protected]
Important Disclaimer: *Target returns are illustrative and assume portfolio exit at 12x or higher. Past performance is not indicative of future results. The projections and scenarios presented are based on assumptions that may not materialize. Actual results may vary significantly based on portfolio performance, market conditions, and other factors. Nothing in this presentation constitutes a guarantee of returns. All target multiples and payouts are illustrative and subject to actual portfolio performance. If exit proceeds are insufficient to pay all target amounts, payouts may be reduced pro-rata.