Newport Beach-based investment firm Kodiak Capital Group LLC is off to a busy start this year with several deals on the books and plans to consolidate its East Coast operations in Orange County in coming months.
The firm, which typically makes noncontrolling investments in “lower middle market” businesses, has been increasingly active in the OC and Southern California markets, said Managing Director Ryan Hodson.
Recent deals include an agreement to buy up to 9.9%, or as much as $5 million worth of common stock, from Irvine-based fitness equipment maker XFit Brands Inc.
XFit’s products are sold to gyms and fitness facilities, as well as directly to consumers. It provides cages and other equipment to all Ultimate Fighting Championship gyms, a key niche, according to the company.
XFit had about $1.5 million in revenue and about $109,000 in profit for the year through June. It said the proceeds from the agreement with Kodiak would mainly be used for working capital and general corporate purposes.
XFit also has a $1.5 million debt facility with Pacific Investment Management Co., with the right to increase the amount to $2.5 million, according to a filing with the Securities and Exchange Commission.
Newport Beach-based Pimco is a bond fund manager with about $1.68 trillion in assets under management as of Dec. 31. It was cofounded by Bill Gross in 1971 and at one point had about $2 trillion in assets. It’s currently headed by Chief Executive Douglas Hodge and Group Chief Investment Officer Daniel Ivascyn. It manages the world’s biggest bond fund, the Pimco Total Return, which has about $143 billion in assets.
Kodiak’s Hodson said fitness is “definitely an emerging industry,” especially with “a bunch of ancillary brands that are getting involved, whether it’s through clothing or fitness products, sports drinks, or nutritional supplements.”
Pimco’s interest is also telling, according to Hodson.
“Pimco doesn’t usually get behind a venture-stage opportunity,” he said.
Kodiak was founded in 2009 in New York and since then has committed more than $500 million in about 100 deals. It keeps an office in New York with about 10 employees, while Hodson and five others are based in the Newport Beach headquarters.
“We hit the ground running in New York in 2010, but in 2011, we realized there were tons of deals out here in Southern California, not to mention the majority of our investors were here,” Hodson said. “We opened up shop to be closer to them and to have the West Coast presence.”
Hodson said Kodiak has been consolidating its “footprint locally in OC and across Southern California” and will shift offices in New York and Delaware to the West Coast in April.
Kodiak’s focus on “smaller” deals—with investments ranging from “half a million to $5 million”—came after several hard lessons in the firm’s early days, Hodson said.
“Before, we used to overcommit and burn holes in our pockets, and we wouldn’t be able to put the money to work as fast as we’d like,” he said. “Now we’re doing smaller deals, which are more efficient.”
Among Kodiak’s other recent investments are $3 million for an undisclosed Newport Beach-based company, and a $3 million deal with Woodland Hills-based biotechnology company Endonovo Therapeutics Inc.
Kodiak also recently made a $1.5 million equity investment in Irvine-based BlueFire Renewables Inc., which converts nonfood resources, such as trash and agricultural waste, into renewable fuel sources.
“We were really active in the alternative-energy market last year, and we have a strong positive outlook for it in 2015,” Hodson said. “With oil prices falling, we’re looking for other ways for capital to provide us returns in the energy sector.”
Local transactions from last year include a $5 million investment in Greenkraft Inc., an alternative-fuel products maker in Santa Ana, and a $3 million commitment for Costa Mesa-based mobile applications developer Eventure Interactive Inc.
