Butterfly is one of a handful of newer managers that will test fundraising in a year that is as busy as many professionals can remember. Emerging managers like Butterfly are seeing renewed interest from limited partners who spent much of last year re-upping their existing relationships in the pandemic.
“Covid barely slowed the spinoff train down. There was maybe a couple months of pause where folks that were hanging out a shingle maybe stepped back and waited until the dust settled. But pretty quickly we’ve seen another uptick in activity,” said a fund-of-funds LP who invests in emerging managers.
“It’s the same dynamics that have been in place for a number of years: talented and capable younger partners leaving and splitting away from established institutions to start their own thing. In many cases, those new funds and groups are really institutionalized out of the gate,” the fund-of-funds LP said.
This is the market in which Butterfly is raising its next fund, which is targeting $750 million, one of the sources said. It has held a first close, and is approaching another interim close, the source said.
UBS is working as placement agent on the fundraising. A spokesperson for Butterfly declined to comment.
Butterfly was formed by and is led by Adam Waglay, formerly of KKR, and Dustin Beck, who previously worked at Vista Equity. The firm closed its first institutional fund, which it called Fund II, on $520 million in 2019. It also raised $320 million for a co-investment side vehicle at the time, Buyouts previously reported.
Earlier this month, Butterfly announced the acquisition of a majority stake in Pete and Gerry’s Organics, a New Hampshire-based producer of organic eggs. The company sells its products under the Pete and Gerry’s Organic, Nellie’s Free Range and Consider Pastures brands.
As part of the deal, British Columbia Investment Management Corp became a new minority investor in the company alongside Jesse Laflamme, Pete and Gerry’s chief executive.
The investment is an example of Butterfly’s focus, which it describes as a “seed to fork” approach to food that spans agriculture, aquaculture, food and beverage products, food distribution and foodservice.
Technology plays a large part in Butterfly’s deals as a way to accelerate growth and manage costs at businesses that may be ripe for an upgrade. The firm’s goal is to use technology to streamline operations, which it applied to investments in Pacifico Aquaculture and Lemonade Restaurant Group.
“Capital in a way has become commoditized, but being specialists — and being able to be valued-added partners that aren’t just armchair quarterbacks — is pretty helpful,” Beck told Buyouts in 2019. “It allows you to see a unique angle others might not see,” he said.
Beck worked at Vista Equity from 2008 to 2012. Waglay worked at KKR from 2007 to 2015. The two brought lessons they learned at their former firms to the new venture, which they launched in 2015.