Summit Partners has entered the fundraising fray, sending out books for a $3 billion-targeted vehicle that will make late-stage private equity and leveraged buyout investments. It is a follow-up to a $2.08 billion fund raised in 2001, which featured a positive internal rate of return (IRR) even before recent IPOs for portfolio companies like SeaBright Insurance Holdings Inc., and OptionsXpress Holdings Inc.
Industries of focus for the firm include software, communications technology, semiconductors, financial services, healthcare and life sciences.
“They won’t need to do much work to hit $3 billion,” says an existing Summit LP who expects to re-up. “It’s a strong firm with very good returns.”
Where Summit may run into difficulties, however, is in its quest to simultaneously raise a second venture capital fund targeted at between $250 million and $300 million. The Boston-based firm’s original VC vehicle was known as the Summit Accelerator Fund (that moniker has been dropped for the new effort), and was raised just before the Internet bubble burst in 1999. Predictably, it hasn’t fared too well. According to data from the California Public Employees’ Retirement System (CalPERS), Summit Accelerator featured a -8.9% IRR as of last September.
It is worth noting, however, that the new Summit venture capital offering doesn’t look much like its predecessor. Not only does it have a growth equity focus as opposed to Accelerator’s early-stage mission, but it also has a very different staff. Gone is Accelerator Founder Kip Sheeline, plus General Partners Mike Balmuth and Marc Friend. Private equity Vice President Tom Jennings will transition into a VC-focused principal role, while Greg Goldfarb will be promoted from senior associate to vice president. The group also is looking to staff up.
“I don’t think it will be a problem raising both funds at the same time,” says Marc Friend, who resigned from Summit in order to return to his early-stage investing roots. “I’d put money in both.”