GP Profile: Partech Partners

As an early backer of UK-based online furniture company Made.com and Korean payments app Toss, investing in technology-based startups has been part of Partech Partners' DNA for the past three decades. This year, a new initiative will take the firm on a related, but slightly different trajectory, and see it officially partnering with private equity for the first time. Partech is currently in the early stages of setting up a co-investment vehicle to take minority stakes in European mid-market companies in order to support their digital initiatives.

"Up until now, we have focused our efforts on seed, venture and growth investing, but all with some kind of digital and technology slant, so we decided to propose our expertise to companies that are not tech-native, but looking to leverage it to transform themselves," says Jean-Marc ­Patouillaud, managing partner at Partech. 

Partech will target the leveraged buyout market – namely companies without digital expertise – and co-invest pari passu with a mid-market sponsor at the time of acquisition. Patouillaud is clear that partnering with private equity is at the heart of the new initiative and there is no intention for Partech to invest directly on its own.

"We see ourselves as the digital experts reporting to the board of the company," says Patouillaud. "The benefits are clear, as the sponsor will have a partner fund and the portfolio company will seize new opportunities of development or change of model without any of the cost, since we won't take any fees for the services we provide."

From seed to growth
Across its four core strategies – seed, venture, growth and Africa - Partech invests in roughly 45-50 companies a year with tickets of between €200,000-50m each time.

The seed arm has a global reach and aims for three or four deals a month. It is on the way to closing its third fund – Partech Entrepreneur III, targeting €100m – with a first close announced at roughly half the target in Q1 this year. Deployment has already begun.

Fund I is fully deployed and Fund II has completed its first investment cycle but is not fully deployed. There is a sizable amount of dry powder set aside intentionally for follow-on investments.

Partech's venture arm – European and transatlantic in focus – completes five or six deals a year with an average ticket size of €8m. The firm is currently deploying Fund VII, which closed on €400m in 2016. One of its latest investments was in UK-headquartered booking software developer Shedul in April, for which Partech led a $20m series-B funding round.

As for the European-focused growth arm, the team is on the fundraising trail for Partech Growth II and working towards a first close with a slightly higher target than its predecessor, which closed on €400m in 2015 and is almost fully deployed in terms of first-time investments. The latest investment is Germany-headquartered sport and fitness subscription platform Urban Sports Club. 

This year also sees Partech expanding into a new continent with Partech Africa holding a final close in January 2019 on €125m. The aim is to transact three or four deals a year. Both the first and most recent investments were headquartered in Nigeria.

Tech ecosystem ­­­­
In terms of LP base, most of the firm's investors are headquartered in Europe, though there are a few US and Asian institutions and corporates in the mix as well. There is currently a push to expand the investment scope in south-east Asia and South Korea.

Partech has built on the relationships formed with its corporate LPs – such as Renault-Nissan and Carrefour – and fostered an increasing number of additional ties beyond its investor base, says Patouillaud. These relationships have led to what the firm calls an unofficial "tech ecosystem" with the aim of connecting corporates with startups.

"Corporates don't invest in venture funds to do acquisitions, as this isn't their main goal, but they can add value and be better informed by being emerged in their world," says Patouillaud. "Large corporates are interested to know how their space is going to be disrupted, so being connected with the startups in the industry is useful and relevant. The dialogue created could be with a view to buy and sell to each other as well as open up discussions around distribution channels or joint product development."

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