Diversis raises debut fund in six months after six years of deal-by-deal investing

Diversis Capital, which has just closed its debut fund, spent several years investing on a deal-by-deal basis before deciding to hit the fundraising trail.

It’s not an easy decision, especially when a firm has been able to steadily invest outside the confines of a closed-end fund.

But in this case, Diversis invested in several platform companies and had one exit before choosing to take the fundraising plunge, the firm’s co-founders, Kevin Ma and Ron Nayot, managing directors, told Buyouts in an interview Tuesday.

Ma and Nayot launched Diversis in 2013 after working at Gores Group. The firm targets middle-market software companies. It closed its debut fund on $255 million after about six months of fundraising, the firm said June 4. Diversis worked with Evercore on the fundraising.

“It’s never easy. It takes a lot of work, traveling a lot. We met with lots of people. What resonated was that we’ve been doing this for six years, we built a core, good team that worked together very collaboratively with a good culture,” Nayot said.

Diversis Capital Partners I attracted LPs including endowments and foundations, investment advisers and funds-of-funds, public and private pension plans, family offices and financial institutions, the firm said.

Other executives at the firm include Joseph Lok, vice president, who joined in 2013 from Ares Management; Ryan Tanaka, vice president, who joined in 2016 from Gores Group; Devin Scott, vice president, who joined in 2013 from Credit Suisse; and Michael Garland, vice president of business development, who joined in 2013 from Signature Group Holdings.

One advantage firms like Diversis have when they raise their first fund is their own track record built through their pre-fund investments. Track record can be an obstacle to a new firm because prior firms generally don’t like to share track records with departing executives. 

Diversis made five platform investments prior to raising the fund, and so far has made two investments out of the fund. It also made four add-on investments.

Perhaps most important, the firm had an exit that helped it illustrate to prospective LPs how it buys, operates and exits an investment. The firm sold Blue Software, which the firm acquired through a corporate carveout in 2014, to Danaher Corp, Diversis said in a statement.

Other investments in the portfolio include Pure Cars, which Diversis invested in through Fund I. PureCars provides market automation and business intelligence for the automotive industry.

It also invested in Marketron, which provides revenue management and audience engagement software for media companies; ServicePower, which provides market workforce software; and ArrowStream, which provides supply chain technology and logistics services for the food-service industry.

Action Item: Check out Diversis’s Form ADV here: https://bit.ly/2K0otES