Technology-focussed growth equity firm Kennet Partners has closed its third fund on roughly $315 million (€201 million).
The Silicon Valley- and London-based firm topped by $100 million its previous fund, launched while Kennet was still partly owned by investment bank Broadview International.
“This fund is going to follow a similar focus as the last fund,” Javier Rojas, head of Kennet’s US activities, told PEO. “We will invest both in the Europe and US. We will focus on companies that are capital efficient, and US companies with bootstrap financing.”
Launched in the early months of 2007, Kennet III has already been invested in two disclosed and one unannounced deal, according to Rojas. The fund is roughly 10 percent invested.
Kennet provides growth equity financings or recapitalisations for small to mid-size companies in the software, IT Services, semiconductor and new media sectors. The firm specialises in leading what it dubs “bootstrap” businesses – founder-managed companies that have not received outside capital support, such as venture finance – to high levels of growth, often by expanding them into the US or Europe.
The firm typically invests in companies requiring between $10 million and $20 million in funding, but can make commitments of up to $30 million on its own or $100 million with co-investments from its limited partners.
Kennet III’s investor base was heavily skewed towards several well known funds of funds, including: Credit Suisse, Customized Fund Investment Group, Access Capital Partners, Adveq, Capital Dynamics, BNP Paribas Private Equity and Credit Agricole Asset Management Capital. Kennet said the fund received no backing from public pensions or endowments.
The firm believes is well-positioned to take advantage of the conundrum facing several seed-stage tech companies and venture firms: what to do when the public markets are hostile territory for tech floats.
The companies that Kennet targets are usually not in immediate need of a public offering to satisfy major investors, and Rojas says that a large number of high-growth markets with founder-managed companies are “fundamentally doing well”.
Rojas also expects more private equity firms to be potential bidders on Kennet portfolio companies as public offerings become less viable exits and listed-strategics back away from new deals.
“I wouldn’t be surprised to see a robust private equity market providing liquidity to these companies,” he said. “I think you’re going to start seeing a number of funds fulfilling this role.”