Tell us about your firm. What makes it different?
We are big believers in focus. Over 25+ years, we have learned what we do best and work hard to stay true to our strategy built on industry segment depth, business model resilience, and the scale of companies to which we can be most helpful. These beliefs are fundamental to our culture and drive our thinking about fund size, partnership with management teams, portfolio concentration, and firm composition. Over the course of nine funds, we have invested $6+ billion in 160+ rapidly growing companies in a relatively even mix of minority and majority ownership positions. We are currently investing funds totaling $1.7 billion, which we raised in the spring of 2020 after the onset of Covid-19.
At Spectrum Equity, we all share a deep curiosity about what makes the Internet-enabled software, information services, and content companies that we invest in work. Our business has been built on getting to know founders and management teams years before we actually have a chance to invest, building relationships with the ones we find most interesting, and being able to take on a wide range of transaction sizes and complexities when opportunities arise. Our familiarity with how they operate, compete, innovate, grow, and problem-solve allows us to act quickly and with conviction when the time is right — while being thoughtful about the best alignment between management, boards of directors, and shareholders. Depending on the situation, we will invest anywhere between $25 and $200+ million, with or without co-investors or leverage.
What defines your portfolio?
The entire Spectrum Equity portfolio is built on highly persistent, enduring customer relationships. Our companies’ underlying revenue engines have become increasingly diverse as the Internet has matured to enable so many variations of SaaS and consumer subscription models, marketplace businesses, and recurring transactions. Over time, we have developed ways to analyze and clearly understand customer health and engagement. We develop our investment theses on top of this foundation and do our best to ensure that our priorities are in sync with those of management. We also push our thinking to identify and appropriately value structural and competitive advantages within market segments. These might manifest as proprietary content, network effects, online community, quantifiable brand loyalty, operating leverage with scale, or very low customer concentration.
Every year, regardless of market cycles, we find these core attributes in companies operating across more and more of the economy. Working closely with our management teams, we have been fortunate to establish particular depth in FinTech, Healthcare IT, Risk Management/Compliance, and EdTech. Growing areas of our portfolio include InsureTech, Logistics, FoodTech and data services, and LegalTech. Examples of these themes from our present and recent past include Ancestry, Definitive Healthcare, GoodRx, GrubHub (Seamless), Lucid Software, Lynda, Origami Risk, SurveyMonkey, and Verafin.
How is the firm different today than when you first started?
At Spectrum’s inception in the mid 1990’s, the wave of investment in online access and bandwidth following telecom deregulation was fueling growth across network infrastructure, software applications, and early versions of online services. In turn, the evolution of offline information businesses such as cable, radio, and listings businesses to their online versions had begun to accelerate and broaden. In those years, our firm had a multi-stage approach across a wider range of business models, including owners and operators of wireline and wireless networks, technology suppliers, software companies, and online media. Over time, as our target industries expanded and competition among investment firms intensified, we refined our approach to be exclusive to growth equity, and the vast majority of our investment activity moved into the software application layer, both of which have been our focus for the last 15+ years spanning 5+ funds.
Due to Spectrum’s concentration, our companies face many similar strategic and tactical challenges as they scale. We have prioritized coordination and collaboration among our portfolio management teams across key functions and found new ways to invest in these efforts. For example, we have hired practice leaders within Spectrum to provide expertise in human capital, product & technology, finance & business operations, and legal support. They organize our companies’ departmental leaders into communities by providing content and connections, sharing key learnings, hosting targeted events, and being responsive to questions or needs as they come up. Our goal is for our collective experience to become more useful to our companies and more valuable to our investors over time.
Why is your firm a part of NVCA?
The NVCA does truly outstanding work to champion the interests of the entrepreneurial ecosystem, educate regulators about our industry, and promote best practices as they emerge. Their advocacy with legislators in DC, and occasionally at the state level, is more critical than ever to preserve the system that has allowed venture capital and growth equity to be such a tremendous source of innovation and job creation in the US. It has been an honor and an education to work with the team at the NVCA, especially during such a dynamic and challenging time. As a member of the NVCA Growth Equity Executive Committee, I have also enjoyed the chance to work with industry peers on common causes and opportunities.
Tell us about the current growth equity landscape in your geography/region.
Spectrum has always been a bi-coastal firm with a portfolio across North America and Europe. As it becomes more feasible for companies to operate across geographies, our activity continues to grow in other established global markets. An increasing number of our prospects have global customer bases and employee footprints from day one, as the fixed costs of starting and growing companies have decreased with the efficiencies of the cloud. We are finding these trends in most industry verticals and often outside of the major technology hubs. They have accelerated out of necessity during the pandemic, and we expect some of those shifts to be permanent. This only expands the opportunity for experienced investors to support companies with the most promising potential and value propositions to thrive, wherever they are located.
Describe your firm’s culture in 5 words or less.
Focused, collaborative, committed, curious, honest.
Content contained in the NVCA Member Spotlight featuring Vic Parker is not intended to and does not constitute investment advice. Your use of the information in this post and materials linked is at your own risk. Spectrum Equity does not make any guarantee or other promise as to any results that may be obtained from using this content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. Past performance is not indicative of future results, and there is a possibility of loss in connection with an investment in any Spectrum Fund. To the maximum extent permitted by law, Spectrum Equity disclaims any and all liability in the event any information, commentary, analysis, and/or opinions prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. The specific companies identified above does not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies.
Cassie Ann Kiggen
Cassie Ann Kiggen2021-02-10 12:00:032021-02-11 04:02:57NVCA Member Spotlight: Spectrum Equity