Knox Lane, a new-to-the-scene San Francisco private equity firm, has clinched its first investment to date at the intersection of healthcare and advertising.
The mid-market firm has made a strategic investment in Fingerpaint, a marketing, market-access and commercialization agency serving the life sciences industry. Fingerpaint founder and CEO Ed Mitzen will continue to lead the company alongside the existing management team, maintaining a significant investment.
The deal comes about a year after Knox Lane was launched by managing partner John Bailey and partner Shamik Patel, veterans of TPG Growth, the growth equity arm of TPG.
Financial terms of the strategic investment were not disclosed. Knox Lane aims to invest in consumer and business services assets with enterprise values ranging from $50 million to $500 million, but has the flexibility to go outside of that range.
Fingerpaint states on its website that it generates $82 million in annual revenue. The business has grown at a CAGR of 30 percent over the last few years, the firm told PE Hub.
Founded in 2008 by Ed Mitzen, Fingerpaint is a full-service health and wellness marketing agency that has seen 12 consecutive years of revenue growth. The business serves clients in the pharmaceutical, rare disease and gene therapy arenas.
In advance of the deal, Knox Lane sought to invest behind the end-market tailwinds of pharma R&D, compelled by the growth in funding going into the industry, along with the shift toward outsourced services including those that support the successful commercialization of new products, Bailey told PE Hub. Pharma and biopharma businesses “require real education in terms of payers, healthcare practitioners as well as consumers to tell that story well,” he said.
Knox Lane got to know the company before Fingerpaint set out to look for a partner, Bailey added, finding its strong client retention, win-rate and cultural metrics compelling. Ultimately, sources said, Knox Lane’s knowledge in the space, experience with analogous assets, and investor-operator mindset helped it to prevail over multiple higher offers.
Bailey, for his part, departed in 2015 after eight years at TPG Growth to become president and CFO of e.l.f. Beauty – a makeup and beauty products brand acquired by TPG Growth a year earlier. Bailey helped lead elf through its 2016 IPO on the NYSE.
Knox Lane will look to support growth at Fingerpaint through organic efforts such as investment into digital marketing and analytics, while “strategic M&A is going to be a central part of the story,” Bailey said. The company will evaluate potential acquisition opportunities across digital analytics, medical communications and medical affairs, among others, he said.
Fingerpaint has already grown in part through M&A, agreeing to acquire health care consulting firm 1798 in February in a move to build out its market access and commercialization offerings for biopharma customers. Headquartered in Saratoga Springs, New York, Fingerpaint now encompasses five offices spanning North America, employing more than 400.
Knox Lane in June collected about $245 million for KLC Fund I, according to an ADV filing. That put the vehicle almost halfway toward its $500 million goal less than four months after initial Form D fundraising documents were published, Buyouts previously wrote.
Knox Lane declined to comment on fundraising, but said Fund 1 will target six to eight total portfolio investments.
Alongside Bailey, most of the remainder of the Knox Lane team came out of the TPG ecosystem, with the firm’s founding team encompassing both former investors and operators. Co-founder Patel, who was with TPG Growth for seven years, led services-focused investing. He departed in 2019, his LinkedIn profile shows.
The firm will seek future investment opportunities operating at the nexus of consumer, services and healthcare, with the vitamins, minerals and supplements category an example of an area of interest. “It’s a $50 billion category and has really nice secular growth … it’s an area where we have spent a ton of time historically,” Bailey said.
Houlihan Lokey advised Fingerpaint, while debt financing was provided by MidCap Financial.
Updated: This report has been updated to clarify Bailey’s role at e.l.f. Beauty.