Just recently, Spark Capital and Greycroft Partners announced new funds targeted at later-stage, growth investments. These investments, often labeled growth equity deals, are becoming an increasingly prominent part of the private company financing landscape.
Growth equity covers financing deals into relatively mature (usually five years or older) companies that are revenue-generating, growing and often profitable or nearing profitability. Growth equity deals often, but not always, involve companies taking on their first institutional investment and can come from a multitude of investor types including pure-play growth equity firms, venture firms and even private equity investors. The funding in growth equity deals can be used to accelerate the organic growth of a company which is profitable and already growing, to fund M&A opportunities or to provide liquidity to management and early employees of more mature companies.
Note: You may want to check out our free Growth Equity Financing Report.
This analysis covers investment trends in growth equity rounds including:
- The top sub-industries for growth equity deals
- Where growth equity deals are going
- The most active investors in growth equity deals.
Growth equity funding crosses $1B+ quarterly mark
After a tepid three quarters to end 2013, of which all fell under $500M in total funding, Q1 2014 exploded with more funding than any other quarter in the last 2 years. Last quarter saw nearly $1.2B invested globally across 52 growth equity deals, up 40% on a funding basis, and 16% on a deal basis. The 52 growth deals were also a multi-year high, while the large funding was driven by 7+ deals over $50M.
Internet & Healthcare Lead Growth Equity Investments
Internet startups dominated the bulk of growth equity dollars over the past two years. Notable investments in the space include Fotolia’s $150M raise in May 2012 from KKR (KKR went on to acquire the stock image company), as well as Fanatics’ $150M raise in June 2012 from Insight Venture Partners and Andreessen Horowitz.
Healthcare garnered the second largest share with 12% of total funding. Bio-pharmaceutical company Intarcia Therapeutics led all healthcare growth equity rounds with a $160 million round from a variety of backers including New Enterprise Associates, Venrock, New Leaf Venture Partners, and others. When drilling down further into sub-industries, Customer Relationship Management companies garnered the highest number of deals, including investments in Sequoia-backed Medallia and Bregal Sagemount-backed Vital Insights.
Europe Accounts for Over 1/5th of Funding Share
International companies drew the most funding of any geo over the past two years, with a 31% funding share. European companies specifically accounted for 21% of funding behind over 100 investments, the second most of any continent (North America being first).
Diving into North America, California held the second highest share of funding, while New York was third, with multiple $100M+ investments, including Fotalia’s previously mentioned $150M round, as well as EVO Payments’ $174M financing led by Madison Dearborn Partners.
Top 3 Most Active Growth Equity Investors All Outside California
Insight Venture Partners proved to be the most active investor in growth equity rounds over the past two years in terms of number of deals. The late-stage tech investor invested in companies such as GFI Software’s $54M financing as well as SR Labs’ $53M round in January 2013. Rounding out the top 3 are Summit Partners and Accel Partners, respectively.