Rebranded Guidepost Growth Equity talks to LPs about third fund

By Eamon Murphy and Chris Witkowsky

Guidepost Growth Equity, known through July as North Bridge Growth Equity, is targeting $400 million to $500 million for its third fund, according to sources in the market.

Whether the fund is officially in the market, or the team is pre-marketing, is unclear. Guidepost declined comment on fundraising.

The firm’s second fund, raised in 2013 with $582 million in commitments, is more than half invested, Doug Kingsley, co-founder and managing partner, told Buyouts.

The rebranding was intended “to represent what we’re doing in the growth-equity business,” Kingsley said. “We view ourselves as meeting companies along their path and guiding them to further success.”

The firm makes later-stage investments in businesses with $40 million to more than $100 million in revenue, targeting technology companies that are disrupting large markets in business services, communications infrastructure, software and healthcare IT. Check sizes range from $20 million to $75 million, with $35 million to $45 million being a typical amount.

Guidepost started out as an affiliate of Boston’s North Bridge Venture Partners. It was set up as a separate business with its own management company and investment team, pursuing a distinct strategy. For its initial fundraise, the new firm “went to the North Bridge Venture Partners LP base,” Kingsley explained.

“Our co-founding partners on the North Bridge Venture Partners side basically opened their Rolodex … and helped us raise our first fund,” he said. That fund closed in 2007 with $545 million.

For its part, North Bridge Venture Partners raised its last new fund in 2008. Kingsley said he didn’t think there are plans for a successor.

In addition to focusing on Guidepost’s approach, the firm’s new name functions “to complete the separation from our legacy relationship with North Bridge Venture,” Kingsley said.

“Ten years ago when we started, growth equity was not particularly in vogue,” Kingsley recalled. Since then, the sector has matured a great deal, though firms tend to define the strategy in different ways.

“The nature of our business is that we are in almost every case the first institutional capital that these firms have taken on,” he said. Investing for Guidepost is a matter of “going out and finding these companies, building relationships and convincing them to take our capital.”

“Part of our strategy is to find [companies] where they are,” said Managing Partner Russ Pyle. “Even though we’re a technology-focused investor, many of our best-returning investments are in less-obvious locations: Maple Plain, Minnesota (Proto Labs), Manchester, New Hampshire (Dyn), Cedar Rapids, Iowa (RuffaloCODY).” Proto Labs went public in 2012, Dyn was sold to Oracle in January, and RuffaloCODY was acquired by Summit Partners in 2013.

“It’s very much a model of proactive sourcing,” Kingsley said.

Guidepost’s four partners come “from firms with a legacy of cold-calling and knocking on doors and building relationships. We visit several hundred companies a year and get interested in probably a few dozen, and make a small handful — two, three, four investments a year. It’s a little bit of a numbers game.”

He added that with the bar higher than it has been for companies to access public markets, “it’s as good a time as I’ve ever seen in this business.”

Action Item: Contact Doug Kingsley at dak@guidepostgrowth.com

Doug Kingsley, co-founder and managing partner, Guidepost Growth Equity. Photo sourced from firm’s website.