Turn/River raises $168 mln for Fund III, puts $40 mln into security firm Netsparker

  • Firm has in-house operational team for sales, marketing, SEO
  • Invests in SaaS companies doing HR, security, infrastructure
  • Targets bootstrapped, orphaned, venture-backed businesses

Technology investment firm Turn/River Capital has raised $168 million for its third fund, holding “a single one-and-done close,” Managing Partner Dominic Ang told Buyouts.

Fundraising took less than 90 days. Ang said all limited partners in Turn/River Capital II reupped and increased their commitments. Investors are a mix of endowments, family offices and funds-of-funds.

Turn/River also announced Fund III’s first deal, a $40 million equity investment in web application security company Netsparker. Ang said the firm intends to do six to eight deals out of the fund, continuing its existing strategy.

Based in San Francisco, Turn/River invests in software and SaaS companies, especially in HR, security and infrastructure, with more than $3 million in annual revenue.

The firm employs a team of 14, most of whom have operating knowledge in areas including sales, marketing and SEO. “That’s to help the companies that we invest in really accelerate their efforts in those areas,” Ang said.

Turn/River was introduced to Netsparker by an existing portfolio company, Sucuri, which was using its product. “They clued us into this company and how valuable the service was,” Ang said. “We have been speaking to them ever since and have built a relationship with them over the years.”

Netsparker’s core technology, called proof-based scanning, detects potential vulnerabilities without generating false positives, “which is one of the biggest problems in that category,” Ang explained. He said the company has been profitable for almost its entire existence.

“What we’ve come to learn is that — and this is a core part of our thesis — the cost of running these businesses has just come down so dramatically, with the advent of things like Amazon Web Services and Google marketing, that you’re really getting these alternative kind of companies that don’t go through the traditional venture capital rounds,” Ang said.

These bootstrapped businesses are growing and profitable, but may never have experienced the professionalizing effect of institutional capital. “They’re looking for help, and we’re looking to provide that by bringing that expertise and experience in-house.”

Turn/River does two other kinds of transactions: spinouts of orphaned divisions, and growth investments in venture-backed businesses that no longer fit the VC profile.

In the former case, operations that in the past would have been shut down because of cost now become candidates for acquisition. In the latter, companies that would have previously been too expensive to carry forward “really are getting a new life,” Ang said.

Ang founded Turn/River in 2012, having worked first in software, then in private equity at Advent International and Vector Capital.

Action Item: For more on the firm, visit http://www.turnrivercapital.com.

Photo of Dominic Ang courtesy of Turn/River Capital.