Don’t call Spectrum Equity Investors a buyout shop.
Spectrum, which has offices in Boston and Menlo Park, Calif., targets rapidly growing firms that are already profitable. Investments, which range from $25 million to $75 million equity per deal, can be for either majority or minority stakes. Spectrum focuses on three sectors: internet/digital media, software and information services, as well as communications, media & entertainment. “We are more of a growth equity firm,” says Michael Kennealy, a Spectrum MD.
Spectrum’s sixth fund raised $680 million at the end of 2010. About 30% of the pool is invested, Kennealy says. The fund has done six deals, including Animoto, an online video creation company. Last June, Spectrum acquired a minority stake in SeamlessWeb, an online and mobile food ordering service, from ARAMARK. Spectrum, including coinvestors, paid $50 million. Seamless then bought MenuPages in September. The seller was New York Media, which is owned by the Wasserstein Family
One of the firm’s most high profile deals occurred in 2007. Spectrum, at the time, acquired a majority stake in Ancestry.com in a deal valued at $300 million (Spectrum actually invested about $100 million, SEC filings said). In 2009, Ancestry.com went public, raising $115 million. At that time, Spectrum owned 67% of Spectrum or 25.7 million shares, according to SEC filings. The growth equity firm sold about 2.5 million shares in the IPO. Spectrum has more than halved its stake since then via various secondary offerings. As of March 30, Spectrum holds about 31%, or 13.26 million shares, of Ancestry.com, regulatory filings said.
Another notable deal, SurveyMonkey, actually came from Spectrums’ fifth fund (this pool collected $1 billion in 2005. The fund has an IRR since inception of 16.72%, according to March 31, 2011 data from CalSTRS).
Spectrum and Bain Capital Ventures acquired roughly 60% of SurveyMonkey in 2009 from the firm’s cofounders, including Ryan Finley. Spectrum initially invested $65 million into the company, according to sources. TPG, in December, received a minority stake in SurveyMonkey in a complicated deal where TPG to transferred some assets. The deal reportedly valued SurveyMonkey at $1 billion.
What are SurveyMonkey’s future prospects? The company could go public but that’s currently not on the table, a source says. Spectrum Equity hasn’t sold any of its stake and has already earned back half of the money it invested (some came from a $100 million debt financing in 2010), a source says. The company’s cofounders will likely make more on the 40% they retained than on what they sold, persons say.
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