Firms & Funds

Charlesbank targets $1.1bn for sophomore small-cap tech fund

Charlesbank launched its dedicated tech strategy in 2018 with the hires of Darren Battistoni and Hiren Mankodi, both veteran tech investors.

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Charlesbank Capital Partners is seeking $1.1 billion for a second buyout offering earmarked for tech opportunities in the lower mid-market.

The target for Charlesbank Technology Opportunities Fund II was disclosed in City of Quincy Retirement System documents.

Charlesbank may have already exceeded its goal. Fund II’s main vehicle and sidecar pools had as of December 2023 secured just over $1.1 billion, according to Form D documents.

It is not known if the Boston manager intends to remain on the fundraising trail. It declined to comment.

Charlesbank, a mid-market buyout shop, launched its dedicated tech strategy in 2018 with the hires of Darren Battistoni and Hiren Mankodi, both veteran tech investors. The pair previously ran Pamplona Capital Management’s $1 billion tech, media and telecom fund. Before, Battistoni was with Welsh, Carson Anderson & Stowe, and Mankodi, with Audax Private Equity.

At the time of the hires, CEO Mike Choe said Charlesbank was looking for “meaningful ways to participate in the target-rich technology landscape.”

Recent fund performance

  • Charlesbank Equity Fund X (2021 vintage): IRR: 13%; TVPI: 1.16x
  • Charlesbank Technology Opportunities Fund I (2019 vintage): IRR: 61.06%; TVPI: 2.26x

Source: Buyouts data as of June 30, 2023, citing various public pension. Subscribers can view here.

 

 

The strategy has since evolved to focus on mostly control-oriented investing in lower mid-market tech businesses with values of $50 million-$300 million. Sectors of interest are enterprise software, cybersecurity, infrastructure software, cloud computing, financial tech, healthcare IT, internet, tech-enabled services, data and analytics and industrial tech.

Target companies are well-run, have characteristics like proven business models, established product-market fit and stable or rapid revenue growth, and are at or near profitability, City of Quincy documents said. Fund II is expected to deploy $50 million-$125 million to up to 15 investments.

Charlesbank closed a debut small-cap tech fund in 2020, raising $700 million. The vehicle is a strong performer, generating a 2.26x net multiple and a 61.06 percent net IRR as of June 2023, according to Texas County and District Retirement System (see box).

The strategy has so far accounted for 13 platform investments. The newest, announced in January, is Searchlight Cyber, a provider of dark-web threat intelligence software. This investment was preceded by Charlesbank’s acquisition last year of Maltego, an intelligence software platform used for complex cyber investigations.

The tech opportunities team is co-headed by managing directors Battistoni and Mankodi, alongside managing director Mayur Desai, who joined in 2009.

Founded in 1998 by ex-Harvard Private Capital Group principals, Charlesbank closed a 10th flagship buyout fund in 2021 at $3.75 billion. CEO Choe was in March profiled in Buyouts’ Off-duty series.