1) Summit Partners provides growth equity to companies. What exactly does that mean?
Growth equity is a relatively new term that describes what we’ve been doing for 25 years. Our investments rely on the growth of the business—not on financial engineering—and we use little to no leverage. As growth equity investors, we look for rapidly growing, profitable companies with proven business models. Then we provide entrepreneurs with capital and strategic guidance to accelerate their company’s growth. We operate in between venture capital and private equity, making equity investments from $5 million to more than $500 million.
2) How does your firm decide to invest in a company?
We focus on companies run by exceptional entrepreneurs and make investment decisions based on the growth characteristics of the market and the company. We look for companies with a proprietary product or service in a rapidly growing market – across many industry sectors. Once we decide to invest in a company, we are very flexible on the amount and terms of the investment, whether it’s a minority or majority position, and on the type of security.
3) Tell me about one of your recent deals and what attracted you to it.
Earlier this year, we took a minority stake in Heald College, a for-profit, regionally accredited career-focused college with campuses in California, Oregon and Hawaii. Our general thesis is that, while the educational sector performs well in a good economy, it becomes even more attractive in a down economy like the present one. As the national unemployment rate goes up, so do college enrollment numbers—especially at career-focused colleges with good reputations.
4) How have current market conditions affected your business in the U.S.?
It’s a tough market today, so we have to look harder for investment opportunities. But through our proprietary deal-sourcing model, we’re still finding profitable, growing companies in the U.S.—as well as Europe and Asia—that look attractive. This country needs to grow out of the current downturn—and successful entrepreneurial businesses like the ones we back are engines for job creation and economic growth.
5) You have an office in London and are thinking about opening offices in India and China at some point. What are your plans for those markets?
We opened our London office in 2001. Since then, we’ve partnered with nine fast-growing companies, raised a dedicated euro-denominated fund and built a team of 20 investment professionals who speak 16 languages. China and India are projected to grow their economies four-to-five times faster than U.S. markets and therefore are a natural extension for our growth equity approach. More than 25 percent of our portfolio companies have an established presence in Asia, and we’ve hired two Indian nationals and three Mandarin speakers to help build our sourcing networks in those two countries. We expect to look at growth equity investments in the $5 million to $100 million range in the technology, financial services and healthcare sectors in these markets.