Growth investment firm Edison Partners has raised $365 million in its ninth fund – the largest in the firm’s 32-year history.
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LPs include a “diverse mix” of corporate and public pension plans, endowments, fund-of-funds, insurance companies, and family offices, including New Mexico Educational Retirement Board, Rutgers University, Hirtle Callaghan, American Family Insurance, and Renaissance Venture Capital Fund, according to Sugden.
The firm has intentionally opted not to raise more money in its funds as part of its strategy to not grow too large, and still be able to provide the desired attention to the companies in its portfolio, he said.
“While we saw a meaningful increase in fund size, our latest fund is still modest by today’s standards, and that was by design,” Sugden told Crunchbase News. “We actually had a lot of partners try to double their investments with this fund. But we believe it’s better to not raise as much as we can, but instead raise the right amount[…]. We’re still optimistic about the investment environment, but at the end of the day, these things tend to run in cycles, so we keep that in mind.”
Edison is focused on what it describes as the “underserved part of growth equity,” which it considers to be high-growth, capital-efficient technology companies. An estimated forty percent of its investments are in fintech, another 40 percent in Enterprise SaaS companies, and 20 percent in healthcare IT companies, according to Sugden.
Its investments range from $5 million to $20 million with a sweet spot of between $8 million and $12 million. Edison targets high-growth companies with $5 to $25 million in revenue, although it invests in smaller deals through an earlier stage cohort formed out of its larger fund. Investments also include buyouts, recapitalizations, spinouts and secondary stock purchases. Edison’s investments are usually in Series A rounds or a company’s first institutional investment, according to Sugden. It plans to invest in about 20 to 25 companies with its latest fund.
“We are on the either smaller end, or midmarket end, of growth equity. It’s attractive to us to be a key partner to a founder or management team,” added Sugden. “Sometimes funds like ours get defined by fund size but for us a much larger fund would mean a lot more companies and potentially not enough attention given to those in our portfolio. We try to bring a lot of value add.”
As part of its strategy to be on-hands investors, Edison Partners has 12 partners. As a result, each company typically has two to three partners working with a company at any given time.
More than 90 percent of Edison Partners’ current 42-company portfolio includes companies in the Mid-Atlantic, Midwest, Southeast and South, with active and recently exited investments in Florida, Georgia, Indiana, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Texas and Virginia. Currently, Edison Partners manages more than $1.4 billion in assets throughout the eastern United States.
“We have invested in each of Edison’s last three funds. Their team and investment strategy are proven and differentiated,” said Steve Neel, deputy chief Investment officer of the New Mexico Educational Retirement Board, in a press release. “Growth equity provides us with upside return opportunities similar to venture capital, but with the downside risk profile of buy-outs. We are very pleased to continue to invest with the Edison Partners team.”
Illustration: Li-Anne Dias