Fortino Capital Partners holds first close on third fund

Renaat Berckmoes, partner at Fortino, told Unquote that the third fund is the successor of the first fund in terms of strategy and will follow a venture capital investment approach. Fortino Growth Capital I held a final close in January 2016 on €80m.

Baker McKenzie provided legal advice, but Fortino did not work with a placement agent. The fund will follow standard market terms and conditions for management, hurdle and carry.

The GP's second fund targets growth equity investments, rather than venture. It held a final close in Q3 2019 on €242m. It will target eight or nine platform investments and has so far backed two software companies, Maxxton and MobileXpense. The fund has also backed bolt-on acquisitions for travel expense management platform MobileXpense, including Sweden-based eBuilder Travel in March 2019 and Dicom Expense in January 2020.

Asked about the status of the first fund, Berckmoes told Unquote: "Our first fund is fully deployed in the sense that we have stopped investing, but we still have some cash left for follow-on rounds. In terms of percentage, there is just a small fraction left. But most of the companies are cashflow-positive. We have some dry powder just to make sure we can follow on in future rounds, but most are in pretty good shape and won't require a lot of capital going forward, unless they themselves are consolidating."

The first fund's portfolio has not been significantly impacted by the coronavirus pandemic, he added. "We don't have many issues with Covid-19 fallout – B2B mission critical software is quite safe, since it allows companies to work remotely. There is of course an impact on future growth and some have seen this slow down, but they have not seen any significant problems relating to late payments or working capital issues. However, we are monitoring it on a very close basis."

The timeline for the fund's final close may be somewhat dependent on the progress of the coronavirus outbreak, Berckmoes said. "We are aiming for a final close within 12 months but it's very hard to gauge as we don't know how long this situation will last or how deep the economy will be hit, if the recovery will be V-shaped or U-shaped. Part of our investor base is insitutionals, which are less volatile, and in that sense, they should be there when we call on them."

Investors
"We have only targeted our existing investor base initially and have not reached out to new investors yet," Berckmoes told Unquote. "We started pre-marketing in early 2020, then started requesting commitments for the end of Q1."

Asked about the impact of coronavirus on the fundraising process, Berckmoes told Unquote: "Due to the crisis, some LPs are making the trade-off between investing cash in the stock market and making gains in liquid assets or investing into an illiquid asset class such as private equity or venture capital. We could see that there was a trade-off, and that might have reduced the commitments, but it did not have a significant impact, as we got where we wanted to be. Software is generally seen as an asset class that is also fairly liquid in the private market."

The fund has an LP base of 15-20 family offices for the first close with a 60:40 ratio of institutional investors to family offices, Berckmoes said.

On the geographical spread of the LP base, he said: "Around 60% of our investors are Belgian, 20% are Dutch, and we also have investors from Luxembourg and Switzerland. There will be a few US investors, too, who have invested in us for a long time."

The firm has committed 5% of the fund's target size.

Investments
Asked about the vehicle's investment strategy and geographical focus, Berckmoes told Unquote: "We invest in software and technology with a strong focus on B2B software, tech platforms and have a regional focus on Benelux. Beyond this, we also look at France, Germany and Scandinavia. In Benelux we target lead investor positions, in the bordering regions we partner up with local VCs, especially since the rounds are usually larger."

The fund plans to make 12-15 platform investments and will write equity cheques of €1-5m for its first investment in a company, followed by two times the same amount in total. "We have a high-end range of €12-14m per investment," said Berckmoes. "Most companies don't need that much, just the ones that can really grow fast internationally and with management who are not going to sell too fast to strategic parties."

The fund has investments in the pipeline, Berckmoes told Unquote. "We expect to do our first investment quickly; we are in due diligence and final negotiations, which should be completed by the end of April."

He added that the firm will use its network to continue to develop relationships for investment opportunities while coronavirus lockdown measures are still in place. "For the pipeline, most of the companies are ones we have had contact with before the outbreak and they are not entirely new to us. The ones we e-meet now are probably not ones we will invest in before we have a physical meeting, but it doesn't stop us from going forward and developing the relationship."

People
Fortino Capital Partners – Renaat Berckmoes (founding partner).

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