Kennet V, a high-growth technology fund launched by tech investor Kennet Partners and Edmond de Rothschild Private Equity, has raised €223m (£200m).
Investors from Japan, China and the rest of Asia backed the fund, which is looking for opportunities in the European software-as-a-service (SaaS) market.
British Patient Capital, the long-term investment arm of British Business Bank, also invested €57m in the €223m fund.
The company targets “must-have” SaaS solutions in areas such as legal, compliance and accounting, many of which fall under the description of financial automation.
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The fund has already made four investments and has more in the pipeline in what it describes as “start-up-strapped” and “capital-efficient” companies.
Kennet V’s investments to date include companies such as Eloomi, a cloud-based performance management and learning management system, and Codility, a premier remote platform for hiring software engineers.
Kennet invests in established, high-growth technology companies that are founder-owned and built without significant outside capital.
Typically, Kennet’s investment is the first external funding companies receive and is used primarily to support international expansion, enabling companies to develop a SaaS business model.
Previous fund investments include Receipt Bank, the leading pre-bookkeeping tool for accountants and bookkeepers; Nuxeo, a leading content services platform; and Rimilia, a financial automation software platform as well as numerous discontinued companies.
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The fund, Kennet V, will have a lifespan of 10 years, with investments made in the first five years in the business-to-business sectors, before recouping its money over the remaining period.
Kennet chief executive Hillel Zidel said the fund invests in companies with three main elements: they are customer-centric with low customer turnover, they have been built at a level of scale without depending outside investors, and they have founders who will use “Kennet’s money as wisely as they used their own money”.
Zidel said, “We like Founders to sleep well at night.”
Kennet has an advisory board, many of whom are former SaaS company executives, who can help mentor and advise some of the recipient companies and can sit on the board.
Zidel said often these types of “short-booted” companies don’t have the time, expertise or capital to know how to expand into larger international markets such as the United States or know when to appoint. senior management figures such as a CFO.
Fellow Managing Director Michael Elias pointed out that Kennet is a growth capital firm, not a venture capital or buyout firm and is flexible about the size of the stake it takes in companies as it is “significant “.
He added that the fund’s capital would be used for growth and expansion, particularly in the areas of sales and marketing for recipient businesses that have demonstrated resilience to turbulence such as Covid-19.
Interestingly, valuations of the type of private SaaS companies haven’t changed much since the start of 2020 and the Covid outbreak, according to Kennet.
Elias said public market valuations of SaaS companies, particularly in the United States, had been very strong and appeared to have rebounded from first-quarter lows.
Kennet is a long-time investor in European technology with offices in the UK and US, managing over $1 billion in assets in total. It does not publicly state a target rate of return for its funds.
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