Activant Capital, a seven-year-old, Greenwich, Conn.-based growth equity firm that's still making a name for itself, has managed to secure $257 million in fresh capital commitments, despite that the U.S. economy appears to be headed into a recession.
It's something of a coup for founder Steve Sarracino.
It also begs the question: Who is Steve Sarracino, and why are people trusting him and his 10-person firm with their investing dollars?
To find out more, we reached him last week at his home, where -- like a lot of us -- his young children whooped and hollered in the background. Amid the din, he explained his trajectory to date: Wharton. Summer internship at McKinsey. A gig as a vice president at the private equity firm American Capital, where he cut his teeth working on buyouts. He also recounted joining a small venture and private equity firm in San Francisco called Serent Capital that was co-founded by two former McKinsey partners.
It's there that the story arc changes a bit. Sarracino says he got himself fired from that last job, and that he found himself in 2009 with "literally no job [prospects]" and "nothing to do." Worried about losing any momentum he had begun to gather, he talked with mentors who told him if he wanted to stick with investing, he'd better start doing one deal at a time and hope these turned out.
They did. In fact, by 2015, Sarracino persuaded investors to commit $75 million to Activant's debut fund. Its second fund closed with $129 million in 2017.
He called it a "long process," but today, Activant sits between venture and growth deals, with a 15-year investing horizon and a concentrated approach to taking stakes in companies, many of which happen to center around e-commerce infrastructure and payments.
One of these is Bolt, a young San Francisco-based company that's trying to build a more seamless checkout process for online retailers that compete with Amazon and, toward that end, integrates with shopping carts used by customers of Shopify, WooCommerce and Magento, for example. It last year closed on $68 million in Series B funding led by Activant and Tribe Capital and has raised $90 million altogether.
A more recent check went to Deliverr, a San Francisco-based logistics and fulfillment company that promises its customers fast delivery by renting warehouse space around the country versus using a centralized warehouse model; the company closed on $40 million in Series C funding earlier this year led by Activant. (Flexport CEO Ryan Petersen also joined the round.)
Activant has also in recent months backed Finix, a four-year-old, San Francisco-based payments infrastructure company whose Series B round Sequoia Capital led but later backed out of, citing a conflict of interest. (As we reported last month, Sequoia simply walked away from its $21 million investment in Finix because of its ties to the powerful payments company Stripe, which might not have liked the tie-up.)
Without specifying how much Activant has invested in each of these companies, Sarracino said last week that checks from the firm typically range from $25 million to $65 million, though the team has gone "as low as $15 million." He said Activant -- which also backed the predictive analytics company Celect before it sold last year to Nike -- will also occasionally write $3 million or $4 million checks into young startups that are too early-stage for the outfit but that it wants to track closely.
Asked how big a stake it wants for its checks, Sarracino insisted that it doesn't think in terms of targets. It instead "targets returns." He also said he doesn't care who else is involved in a company before Activant finds it. Though somewhat hard to believe, he tells us that when the firm is discussing deals, no one on the team is allowed to bring up who invested in a company previously because he doesn't want a particular brand (or lack thereof) to influence Activant's decision-making.
As for its newest fund, even while it's roughly twice the size of its last vehicle, Sarracino said the plan is to continue to make three to four investments each year and that the portfolio will feature just eight or nine portfolio companies when all is said and done.
Before we parted ways, we had to ask about fundraising in the age of COVID-19. We wondered if perhaps the firm closed its newest fund earlier this year, before the spread of coronavirus turned the U.S. economy upside down, and was just announcing it belatedly.
He said it closed on March 31, and that commitments to Activant's newest efforts came from North American and European "foundations, endowments, family offices that donate incredibly amounts of money . . ."
He said that to "hold this thing together through March was a testament to our business."
He sounded relieved. He also sounded like right now, he sees Activant's mission -- beyond making money -- as helping small and medium-size businesses bounce back from the brink, where many are hanging on by their fingernails at the moment.
Indeed, he said the firm is actively looking for more infrastructure plays toward that end.
"More than ever, we can't allow the SMB world to get hollowed out here by Amazon," Sarracino said. "I do think making their e-commerce businesses more robust [through bets like Deliverr and Bolt] can help get them back."