Key Takeaways
- • Haveli Investments completed a majority investment in Sirion, a contract-management software maker, in February, buying out earlier backers including Sequoia and Tiger Global.
- • Mihir Shah of RealClearMarkets argues that the Sirion deal illustrates a broader pattern in which buyout firms acquire mature venture-backed companies that have outgrown venture return expectations.
- • The middle of venture portfolios, featuring profitable or nearly profitable companies growing too slowly for venture math, is described as a source of buyout opportunities.
- • Buyout funds that target these companies may be able to source growth at a reasonable price, according to the author.
Summary
In February, Haveli Investments completed a majority investment in Sirion, a contract-management software maker, buying out earlier backers that included Sequoia and Tiger Global. According to RealClearMarkets columnist Mihir Shah, the transaction serves as a clear template for a trend he sees across private markets. In this pattern, a company matures into a durable, profitable business, but its growth rate no longer meets the return thresholds its original venture investors require. A buyout firm then steps in to own the company's next phase.
Shah argues that the middle of a venture fund's portfolio is where such companies tend to be found. These businesses are profitable or nearly profitable, yet they grow too slowly for the venture model to generate the outsized returns that early-stage investors seek. Such companies are well suited to the ownership and control that buyout capital provides.
The author contends that buyout funds structured to pursue this segment of the market will be able to source growth at a reasonable price. The primary source is an opinion column, and it does not provide additional deal terms, valuation figures, or fund-level data for the Sirion transaction.
Shah argues that the middle of a venture fund's portfolio is where such companies tend to be found. These businesses are profitable or nearly profitable, yet they grow too slowly for the venture model to generate the outsized returns that early-stage investors seek. Such companies are well suited to the ownership and control that buyout capital provides.
The author contends that buyout funds structured to pursue this segment of the market will be able to source growth at a reasonable price. The primary source is an opinion column, and it does not provide additional deal terms, valuation figures, or fund-level data for the Sirion transaction.
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