Soundcore gears up to raise next flagship in challenging environment

The fund is one of several emerging managers out in the hyper-competitive fundraising market that has become more challenging for newer shops.

Emerging manager Soundcore Capital is gearing up to raise its next fund, which could target between $400 million to $500 million, sources told Buyouts.

The fund is one of several emerging managers out in the hyper-competitive fundraising market that has become more challenging for newer shops. LPs generally are overburdened with their established managers coming back with new funds at a quicker pace than expected, at larger size and with new products.

Soundcore is not officially in the market yet with Fund III, but has been pre-marketing to LPs, sources said. It’s not clear if a target has been finalized.

The firm, formed in 2015, closed its debut institutional fund on $350 million in 2018. Fund I was called Soundcore Capital Partners II to reflect the fact that the firm had three pre-fund investments after inception.

Soundcore pursues a thesis-driven strategy, targeting buy-and-build investments in businesses with recurring revenues and attractive margins across business and industrial services, specialty distribution and value-added manufacturing, according to the firm.

Soundcore was formed in 2015 by Jarrett Turner, who was later joined by Feliks Zarotsky in 2016. Zarotsky is not going to be part of Fund III, though will continue managing investments out of the earlier funds alongside Turner, a source said.

The firm also has expanded its senior management team with several significant hires. It brought on ex-Wellspring Capital executive Alexander Bues in March as a partner to lead deal origination. The firm also hired as partners Eric Korsten, a senior managing director from Branford Castle Partners, and Jeff Long, who has both investing and operating experience, with stints at Centerbridge Partners and Vestar Capital, according to his LinkedIn profile.

The firm is expected to include two new platform deals – commercial services companies – in the first close of Fund III, one of the sources said. It’s expected that LPs that come into the first closing will be able to coinvest into the deals, the source said.

Soundcore is making efforts to promote equity across the portfolio. It’s establishing a program called Soundcore Works by which every employee will be expected to spend at least one day on site with each portfolio company, experiencing the daily routine of entry-level workers at those companies, one of the sources said. “Listen to them, hearing their thoughts and perspectives on the business and understand the business … from the grassroots,” the source said.

Also, at Soundcore each employee gets a share of carried interest, one of the sources said. And every partner is required to put up at least $1 million as part of the GP commitment to the fund, the source said. “Everyone has real alignment and skin in the game,” the source said.