Kennet V closes on €223m

Katharine Hidalgo
02 July 2020

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Kennet Partners has held a final close for its fifth technology-focused venture capital vehicle on тЌ223m.

Michael Elias, managing director of Kennet, said: "This fundraise was one of the most straightforward fundraisings we've had. We've been fortunate in that our track record is solid."

Registered in February 2018, Kennet Partners V's original target was €200m, with a hard-cap of €250m.

Elias said: "The coronavirus slowed a few investors on the larger side that may have ended up in the fund. But overall, we're really grateful that the bulk of the fundraising was completed before Covid-19 [proliferated]."

Elias told Unquote that the fund's management fee, carry and hurdle rate are in accordance with market standards.

Kennet V is made up of two vehicles, a Luxembourg LP and a parallel French FPCI.

The fund's predecessor, Kennet Partners IV, closed on €105m in April 2015. It is now fully deployed, with one asset exited. Kennet managing director Hillel Zidel said: "Fortunately, buyers of software companies appear to have remained active despite Covid-19. We have a number of portfolio companies in serious discussions with potential buyers at the moment."

The firm did not use a placement agent, while Freid Frank provided legal advice.

Investors
LPs in the fund include the British Business Bank with a €57m commitment, as well as Hermes and Rothschild. Around a third of LPs were existing investors.

The firm partnered with private bank Edmond de Rothschild. "Our LPs included institutions as well as family offices in Europe and Asia. The Asian investors, in particular, were new investors with us," said Elias.

Around a third of investors are based in continental Europe, a third in the UK, and a third in Asia. The fund had a mix of institutional investors, family offices and sovereign wealth funds.

Elias said: "Many of the family offices we've talked to have been wary of VC. Either they've made direct investments and not had good outcomes or seen the volatility of VC funds. We provide exposure to high-growth technology businesses, investing at a later stage. Performance volatility in later-stage investing is much lower than with a VC model. The loss rates in growth equity have been relatively low and that has resonated well with family offices."

There was a €2m minimum commitment, though Elias told Unquote there were feeder vehicles that smaller investors could invest a smaller amount in.

Elias told Unquote that Kennet's GP commitment was in accordance with market standards.

Investments
While Kennet IV had a portfolio of eight companies, Elias expects to make 12 investments in Kennet V. Elias said: "While the fund is bigger, we'll still be making the same character of investment." Kennet invests in software-as-a-service and technology-enabled businesses in the US and Europe.

The fund will provide initial equity tickets of €8-20m, with follow-on capital available depending on the needs of the company.

Kennet V has already made four investments, two based in Europe and two based in the US. Elias said: "We do have deals in the pipeline. We are actively issuing term sheets and are very much open for business. We think this is a very good time to be deploying capital."

People
Kennet Partners – Michael Elias, Hillel Zidel (managing directors).