Summit Partners, slimming down operations, set to launch next flagship

One of the anticipated funds set to hit the market this year is Summit Partners’ next flagship, which will come as the firm works to streamline operations in the face of a tough fundraising environment, sources said.

The fund will be one of the heavily scrutinized products this year, as Summit is generally considered a strong franchise with good past performance. Fundraising last year was strong in terms of absolute numbers, but the capital flowed to far fewer firms and funds than in the past.

Some well-established firms have been able to raise quickly and hit targets, including GPs like TA Associates, which last year closed its 15th flagship pool on $16.5 billion in under a year. Meanwhile, other big names, like Carlyle Group and Apollo Global Management, are taking longer than usual to raise their PE funds.

Summit is expected to launch Fund XII in the first half, according to a limited partner who knows the firm. A target has yet to be communicated with LPs, but the expectation is the firm will try and raise at least as much as the prior flagship, which closed on $8.35 billion in 2021.

The firm’s flagship PE funds invests in growth-oriented, US-based companies across target sectors that include technology, healthcare and life sciences and other growth products and services, according to Summit’s Form ADV. The funds seek to make investments of between $70 million and $500 million, the ADV said.

Last fall, Summit led an investment in Hallmark Health Care Solutions, a healthcare tech company. Around the same time, EngageSmart, a payments company in which Summit had a small stake, agreed to be taken private by Vista Equity, the firm said in a statement.

As Summit embarks on its next fundraising campaign, the firm is slimming down its operations. It decided to wind down its credit operation, formed in 2010, which had raised three funds and was trying to raise a fourth. The Wall Street Journal reported on the firm’s decision earlier.

Summit made the decision that the credit strategy was not core and was a divergence from its growth equity strategy, according to a person with knowledge of the firm.

Other firms have chosen to narrow their focus on their core strategies as fundraising has become more challenging. TA Associates last year decided to not raise its third “double-down” fund that invests back into existing portfolio investments the firm is exiting.

At the time, an LP said, “there’s fatigue because ‘Hey, you guys are back, we have a lot of NAV with you and we can only do so much.’”