Main Capital on the road for debut growth fund with more fundraises in sight

Main Capital Growth Fund I was launched in April 2022 and the vehicle has started to receive its first commitments.

The LP base is expected to consist mainly of European investors, as well as some US- and Asia-based investors. These include a mix of pension funds, insurance companies, family offices and funds-of-funds, said Zwemstra.

The sponsor is raising the fund without a placement agent, said Zwemstra. Loyens & Loeff is providing legal advice.

The vehicle will deploy initial equity tickets in the range of EUR 5m-20m and can provide follow-on investments of up to EUR 30m. It will make a total of 14-16 platform deals.

Zwemstra said the vehicle will target companies that demonstrate high growth rates. In cases where the company is not yet profitable, the vehicle will make a minority investment to help scale the business. Target companies will have an enterprise value of EUR 15m-50m.

The fund will target B2B software and SaaS companies in the Benelux, DACH, and Nordics regions. Other sectors the fund will focus on include health technology, HR software, governance technology, governance risk and compliance, and cybersecurity software.

The sponsor will focus on organic growth and creating strong partnership strategies while supporting the companies to create top-line growth, Zwemstra said.

Fundraising agenda
In addition to its growth fund, the sponsor is planning to raise a EUR 500m continuation vehicle that will focus on healthcare assets within its current fund portfolios. The vehicle is expected to draw investments from new and existing LPs, said Zwemstra, adding that the vehicle is expected to have a "very institutional base".

Zwemstra did not comment on a timeline for the fundraise of the continuation vehicle.

Healthcare assets the GP owns include Swedish Care, a dentistry platform, acquired in 2022; Berlin-based Biomedion, a GxP data cloud platform in the life and health sciences industry, acquired in 2022; Stockholm-headquartered Clinicbuddy, an eHealth SaaS provider to private healthcare facilities, acquired in 2021; Veenendaal-headquartered Boomerweb, an e-health provider, acquired in 2021, according to the sponsor's website.

The sponsor will use a placement agent for the continuation vehicle and will disclose this at a later date, Zwemstra said.

Typically, the sponsor holds assets for five to eight years. The continuation vehicle will allow the sponsor to continue its cooperation with the founders and managers of its portfolio companies. "If one has a solid partnership with a team and both parties wish to continue that relationship, then it makes sense to use a continuation vehicle," said Zwemstra. Zwemstra noted that there are add-on opportunities in some cases so it "makes sense" for the sponsor to roll over those assets to a continuation vehicle. This allows the sponsor to generate liquidity for LPs providing them the option to roll over or attract new LPs, said Zwemstra.

Zwemstra said the sponsor is aiming to raise Main Foundation II in early 2023, and Main Capital VIII in Q1 2024. He added that both funds will be larger than the predecessor vehicles; Foundation II will be a EUR 450m-500m fund and Fund VIII will be EUR 1.6bn-2bn.

Exits and deployment
The sponsor is currently deploying equity via Main Capital VII, which held a final close in October 2021 on EUR 1bn, and Main Foundation I, which held a final close on its hard-cap of EUR 210m in October 2021. Fund VII is expected to be around 50% invested at the end of Q2 2022, including capital allocated for acquisitions and Foundation I is expecting to be just over 50% deployed, said Zwemstra.

The sponsor aims to end Q2 2022 with 15 new platform investments across Fund VII and Foundation I. "Going forward, we will remain active across both funds while also continuing with our buy and build strategy," Zwemstra said. "We will end up with around 40 add-on acquisitions in 2022."

Adopting a buy and build strategy across its funds, the sponsor typically ends up with five to 15 add-ons per portfolio company, adding products, verticals, and/or geographies by building cross-border groups.

The sponsor is seeking to IPO one of its Nordic-based portfolio companies in Q1 2023, said Zwemstra. According to Zwemstra, the sponsor is seeing a lot of appetite from strategic buyers to buy its portfolio companies. Main is expecting six exits this year, three of which have been executed, including the sale of LOCATIQS and Obi4wan in April 2022. It has a portfolio of 35 companies currently across all of its funds and expects another three exits in the course of this year and Q1 2023.

Main Capital's investment team is made up of around 40 professionals. Asked about sourcing deals, Zwemstra said: "We have an ecosystem which sets us apart from other firms. Half of our deal flow is made up of proprietary deals based on long-standing contacts with founders with whom we have established a relationship."

The sponsor has not encountered problems arising from macroeconomic factors, said Zwemstra. "Over the last two and a half years, the macro developments have worked to our advantage," he said. "Covid-19 also worked in our favour due to the development of the software markets and the demand. The trend is continuing and the market environment is strong."

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