Emerging GP Knox Lane hits market at steady pace with second fund

As well established firms struggle to reach their targets, opportunities may open for emerging firms with smaller targets.

An emerging manager who successfully finished raising its debut fund last year is back testing the challenging fundraising market with heftier ambitions.

Knox Lane, formed by ex-TPG Growth partners John Bailey and Shamik Patel, is targeting $850 million for its second fund, with a $1 billion cap, according to a Form D fundraising document and sources with knowledge of the firm.

The firm is among a handful of emerging managers back on the fundraising circuit this year, at a time when limited partners appear reluctant to back newer shops. However, even well established firms are having tough times reaching their targets, which may open up opportunities for emerging firms with smaller targets.

KLC Fund II hit the market earlier this year and has held a first close, collecting more than halfway to its target, sources said. Most of the capital in the first close came from re-upping limited partners, a source said. The firm is now broadening its marketing efforts, according to the source.

A spokesperson for Knox Lane declined to comment.

Knox Lane launched in 2019 and the firm began raising its debut fund in 2020 just as the health crisis shut down much of society. It closed Fund I on $610 million last year, essentially raising the pool by the end of 2021 and leaving it open for some last-minute investors, Buyouts reported at the time.

Knox Lane targets control buyout, mid-market investments in both services and non-discretionary consumer companies with EBITDA of around $10 million to $50 million. End markets include pharma services, residential services, commercial and IT services, consumer healthcare, medical spa and dermatological services, contract manufacturing & packaging, food & beverage, personal care and broader consumer services.

A key to the strategy is partnerships with owner-operators who grew the original company. “We have a special place in our hearts for founder- and family-owned businesses,” Bailey said in a prior interview. Alongside them, Knox Lane aims to optimize operations and accelerate expansion, Buyouts reported.

Bailey worked at TPG Growth for eight years, leading consumer investing. He left in 2015 to become president and CFO of elf Beauty, a TPG-backed makeup and beauty products brand that went public in 2016. Patel spent seven years at TPG Growth leading services investing.

Knox Lane said in February it hired Ryan Buntain as head of investor relations. Buntain joined from Carlyle Group, where he was managing director and senior relationship manager overseeing IR in North America.

Also in February, the firm announced an investment in Spectrum Science, a marketing and communications company for the pharmaceutical, biotech and life sciences sectors.

Knox Lane is among a group of first-timers and emerging managers seeking capital from LPs this year. Others include Coalesce Capital, targeting $750 million for business services deals; Broad Sky Partners, led by the former co-head of Carlyle Group’s long-dated investment platform, targeting $500 million; and Valeas Capital, targeting $500 million, led by ex-Hellman & Friedman and Golden Gate executives.

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