Summit Partners
Summit Partners was founded in the United States in 1984 by Stephen Woodsum and Roe Stamps, two former partners of TA Associates , whose aim was to replicate the Growth Equity approach of their former firm.
The company currently manages over $37Bn, divided between 4 different fund families: (i) U.S. Growth Equity, the flagship fund. Summit launched Summit XII in early 2024; (ii) Europe Growth Equity: a fund with a strategy similar to that of the flagship fund, but focused on a smaller market segment in terms of deal size.
Summit closed Summit Europe III in 2022 at €1.1Bn; (iii) Summit Venture Capital: a U.S. Growth Equity fund that invests in smaller tickets, between $20S and $50M; (iv) Summit Subordinated Debt, which is primarily a debt financing tool for Summit, since the fund only invests in Summit deals. This fund systematically co-invests alongside a third-party debt fund, which negotiates the financing terms to avoid any conflict of interest.
The firm employs 210 people, including over 90 investment professionals and some 20 professionals dedicated to operational value creation. The North American team investing in Summit XII is divided between two offices: Boston and Menlo Park, while the Summit Europe team is based in London.
A proprietary sourcing approach
Summit Partners was founded by two former TA Associates partners who imported their former firm's pro-active origination approach: cold calling.
At the time, junior professionals spent much of their time cold calling founders of fast-growing companies. Summit has since modernized and refined this approach, which now focuses on the target sub-sectors of each Summit sector team. As a result, a very high proportion of Summit's dealflow is proprietary.
Between 2017 and 2022:
- Over 90% of investments have been originated by Summit through its pro-active approach,
- Over 80% of investments were sourced via a top-down approach targeting the firm's preferred sub-sectors,
- The terms of over 70% of investments were negotiated directly with the founders of the acquired companies, without any financial intermediaries.
An institutionalized firm with strong sectoral and operational expertise
Today, Summit Partners is a well-established company with robust internal processes that have been constantly improved over the past 40 years.
The team has built up strong sector expertise, particularly in the:
- Technology sector: Summit targets the software sector in part, but also differentiates itself through its expertise in cybersecurity, IT, fintech and finally in segments neglected by its competitors such as semiconductors / computer equipment (hardware) where Summit will seek exposure via low capital-intensive companies,
- Healthcare sector : Summit mainly targets the healthcare services, healthcare IT and Life Sciences outsourcing tools and services sub-sectors.
Summit Partners also has a Value Enhancement Resources team of 19 professionals dedicated to supporting the growth of its portfolio companies and divided into 4 groups:
- Operations: 8 professionals, experts in sales force efficiency, digital strategy, pricing, M&A integration, customer success, financial planning, financial analysis or growth marketing,
- Technology & Data Sciences: 3 professionals, experts in cybersecurity, data science & analytics, software development and business intelligence,
- Human Capital: 5 professionals, dedicated to managing and recruiting talent for portfolio companies, including 1 professional dedicated to the technology sector, 1 dedicated to the healthcare sector, 1 dedicated to the services and consumer sector,.
- Capital Markets: 3 professionals dedicated to structuring, financing deals and managing portfolio debt (refinancing, interest-rate hedging, etc.).
This strong sector expertise, and Summit's ability to support its fast-growing companies operationally, has enabled the firm to generate a low loss rate (less than 10%) over the past decade.
A young, stable team that has successfully managed past successions
The firm's Managing Directors and Partners have an average of 17 years' Eexperience at Summit Partners, which is exceptional in the Private Equity world. Senior management is therefore extremely stable.
The firm has also successfully managed succession in the past. In 1999, the 3 founders decided to sell the asset management company. The first succession finalized in 2001 when a group of 5 Managing Directors, all of whom have since retired, acquired the company. Today, the average age of Managing Directors is 47, and CEO Peter Chung is 56.
The "team" risk is therefore particularly low at Summit Partners.
A very good approach to cash flow and fund management
Summit Partners has a proven track record of investing more than 100% of its funds in assets. This means that the team reinvests (recycles) a portion of fund distributions to put all (or more) of its clients' commitment to work in portfolio companies.
The result is a narrowing of the gap between gross and net performance, equivalent to a reduction in management fees. So, if the net performance of a Summit fund is 2.5x called capital (TVPI: Total Value / Paid In Capital), it is actually 2.8x investors' commitment (Total Value / Commitment) if the fund has been deployed at 110% (of which 10% corresponds to the share of recycled distributions) as Summit has done in the past. Thanks to this recycling, Summit makes part of the capital work several times over to better amortize management fees.
