GTCR is on the hunt for Stelao’s platform investment

“Tech M&A, and in particular, software M&A, has certainly been slower over the last 12-18 months,” GTCR director Kevin Fitzgerald told PE Hub. The slowdown is due in part to valuations in the public market and in part to the rising cost of capital. “Because of that slowdown, that means there’s a lot in the pipeline that will come to market once there is a right time. We do think that there will be quite a few opportunities for us to evaluate and hopefully ultimately pursue.”

GTCR is ready to pursue the enterprise software pipeline with The Leaders Strategy model, which has proven to be a consistent investment process that the Chicago-based private equity firm relies on. How the model works is GTCR teams up with executives in what it calls a management NewCo or management startup.

A key tenant of The Leaders Strategy is identifying the executive or executives that GTCR wants to partner with. The firm collaborates on a thesis or an area where it can find an attractive opportunity to invest behind and then forms a company, and the management team ultimately leads and runs it.

Earlier in June, the firm announced it was partnering with Matt DiMaria to form Stelao, a software company. Stelao aims to build a leading enterprise software platform enabling data-driven customer experiences and measurable outcomes, according to the press release.

Alongside DiMaria is Adam Ragauskis, Chris Loeper, Kurt Nelson and Daniel Bohannon. The group was the executive management team at Mindful, a private equity-backed provider of enterprise callback technology. Last year, Mindful was acquired by Medallia, a San Mateo, California-based customer and employee experience company.

Follow the leader

Fitzgerald said GTCR’s core belief is that talented management teams and executives are able to drive outsized growth and scale.

“About 40 percent or so of our investments start in this management startup model where we’re partnering with executives that we’ve built relationships, and we believe have the ability and experience to drive long-term enterprise value creation,” Fitzgerald said. “It’s also important to have a thesis that we feel is aligned with our industry groups and where we spend our time.”

Stelao is currently in its search phase, on the hunt for a platform investment that would be its initial acquisition. From there, the company will make add-ons.

“The add-on strategy is one where we are very purposeful,” Fitzgerald said. “That’s a combination that’s oftentimes organic and inorganic, but we don’t have a preconceived plan, because we haven’t identified our initial platform acquisition.”

GTCR has previously used The Leaders Strategy many times, including in the software field. One past example Fitzgerald pointed out: In 2020, the firm created Guideline (initially called Dreamscape) in partnership with Scott Knoll, David Hahn and Michael Iantosca. The trio worked together from 2012 to 2019 as senior executives at Integral Ad Science, bought by Vista Equity Partners in 2018.

Guideline took nearly two years to complete its search process before acquiring SQAD, an advertising research, analytics and media planning software company headquartered in Tarrytown, New York, in 2022.

Soon after, Guideline acquired a second business named SMI, a New York-based global ad intelligence company. Since then, the company has made subsequent add-on investments.

Fitzgerald said that GTCR envisions itself ultimately having a majority equity position in Stelao but right now, it is a true partnership with the management team.