Firms & Funds

Spectrum quickly moves toward $1.25 bln cap on Fund VIII

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Bain Capital Credit, private equity, secondary transactions, LPs, credit
A sailboat makes its way along the Charles River in front of the Boston skyline on Aug. 4, 2017. Reuters/Brian Snyder
  • Firm expected to close Fund VIII this month
  • Stays disciplined on fund size
  • Recently announced sale of RainKing

Spectrum Equity is heading for a first-and-final close this month for its eighth fund on its hard cap of $1.25 billion, people with knowledge of the process told Buyouts.

Spectrum has been targeting $1 billion for Fund VIII. It’s not clear when Fund VIII hit the market. LPs told Buyouts in June the firm was gearing up to launch fundraising.

Spectrum, with offices in Boston and San Francisco, invests in rapidly growing, profitable companies. The firm invests in business and information services, digital media, software and internet-related growth sectors.

The firm collected around $1 billion for its seventh fund in 2014, $680 million for Fund VI in 2010 and $1 billion for Fund V in 2005.

Fund VII, still in its j-curve period, was generating a 13.2 percent internal rate of return since inception as of March 31, 2017, according to performance information from California State Teachers’ Retirement System. That is up from the 0.38 percent IRR reported as of Sept. 30, 2016, according to CalSTRS numbers.

Fund VI was producing a 19.3 percent IRR since inception as of March 31, 2017, CalSTRS numbers show. And Fund V, as of that date, was generating a 17.82 percent IRR.

Fund IV, which raised $1.75 billion in 2000, was a weaker performer, generating a 7.47 percent IRR and a 1.3x multiple as of March 31, 2017, Washington State Investment Board data shows.

Principal owners of Spectrum Equity Management are Christopher Mitchell, Victor Parker, Benjamin Spero, Brion Applegate and William Collatos, according to the firm’s Form ADV. Applegate and Collatos formed Spectrum in 1993; the firm launched its first fund in 1994. Spectrum managed about $2.1 billion as of Dec. 31, 2016.

Applegate and Collatos stepped back from day-to-day management around the time Fund VII was in market, an LP told Buyouts in a prior interview. This allowed the next generation of leadership — Mitchell, Parker and Spero — to step into the role.

In September, Spectrum announced the sale of marketing-data company RainKing to DiscoverOrg. Spectrum initially invested $67 million in RainKing in 2015.

Action Item: Check out Spectrum’s Form ADV here: http://bit.ly/2xeDCaP

A sailboat makes its way along the Charles River in front of the Boston skyline on Aug. 4, 2017. Photo courtesy Reuters/Brian Snyder