Firm: Bertram Capital
Fund: Bertram Growth Capital III LP
Target: $700 million (estimated)
Called Bertram Labs, the group was hatched about two and a half years ago, around the time of the firm’s acquisition of sneaker-maker SUPRA Footwear, part of Fund I portfolio company One Distribution SARL. The company had built trailing-12-month revenue to $40 million selling high-top sneakers through specialty skateboard stores across the country, according to Bertram Capital Managing Partner Jeff Drazan. The opportunities to expand distribution seemed boundless, especially as the company at the time had only a “rudimentary” website, he said.
Bertram Capital, which manages about $850 million through two funds, hired Brian Wheeler, a partner who had earlier founded his own software consulting firm, in part to build an e-commerce platform for SUPRA Footwear that today accounts for some 30 percent of revenue at the company. Between the roll-out of the website and a host of other improvements—the company has since introduced low-top sneakers, sneaker lines for women and children, and expanded distribution around the world through such retailers as Journeys, Nordstrom and Zoomies—the company over the last 12 months has generated about $100 million in revenue, said Drazan.
Wheeler’s team gave such a forward push to SUPRA Footwear that the group began taking on a life of its own. Its mandate broadened to helping all the firm’s portfolio companies, most operating in low-tech businesses such as consumer products, industrial, business services and healthcare, with such work as enterprise resource planning (ERP) integration, e-commerce, social media, digital marketing and anything else related to information technology.
In another successful intervention, the group helped integrate the IT systems of four companies that were acquired starting in early 2007 to form Author Solutions Inc. The self-publishing company went from publishing some 4,000 books a year to some 25,000 by the time it was sold in mid-2012 to Pearson plc, said Drazan; trailing-12-month revenue over that time jumped to $100 million from about $23 million, half of that growth through acquisitions, half organically.
“It has saved our bacon a number of times,” said Drazan of Bertram Labs, which today counts some nine full-time employees at Bertram Capital and 13 outside consultants working full-time on portfolio-company projects.
The story of Bertram Labs will undoubtedly play a part in the road show for Fund III, which one potential backer expects to have a target in the neighborhood of $700 million. Drazan, who said the exact target has not been set, said that the $500 million Bertram Growth Capital II LP, closed in late 2010, is about 60 percent called and almost 70 percent committed. The fund has room for about two more add-on acquisitions, he said, adding that Fund III is likely to be launched toward the middle or latter half of 2014.
Founded in 2006, the San Mateo, Calif.-based Bertram Capital raised $350 million for its debut, vintage-2007 fund, according to Dow Jones. That fund had generated a 13.7 percent net IRR and 1.5x investment multiple as of March 31 for backer California Public Employees’ Retirement System, which committed $20 million to the pool. Drazan added that Fund I has returned all called capital to investors, while the 2010-vintage, $500 million Fund II on paper is showing similar results to Fund I, although the average investment is just over a year old. Other Bertram Capital backers, according to T-1 Banker, a product of Thomson Reuters, include NB Private Equity Partners, Los Angeles Fire and Police Pension System and the John D. and Catherine T. MacArthur Foundation.
All told Bertram Capital has invested in some 11 platform companies, consummated 14 follow-on deals, and exited four companies. In one of its most recent deals, its third platform investment in the plastics industry, the firm announced on Oct. 2 it had acquired Rowmark LLC, a maker of highly-engineered plastic sheets used in engraving and other specialized applications.
The firm’s website lists an executive team of seven partners and eight investment professionals below the level of partner. Prior to working at Bertram Capital, Drazan was a co-founder and managing director at Silicon Valley venture capital firm Sierra Ventures, and the firm touts its history of applying venture-capital techniques to improving the performance of its portfolio companies. Among his greatest hits at Sierra Ventures was the purchase out of bankruptcy of the assets of what would become StrataCom, a telecom equipment company sold to Cisco Systems in 1996 for $4.5 billion. Drazan said most of his investors have been with him for almost 30 years.