Snapshot: Revelstoke transitions from deal-by-deal to fund

Revelstoke’s co-founder and managing partner Dale Meyer talks to Private Equity International about investing on a deal-by-deal basis and what it means for the firm to launch its debut fund.

The fund, Revelstoke Capital Partners Fund I, held a final close on its $303 million hard-cap on 3 November, surpassing its $275 million target.

Revelstoke was formed in July 2013 by former colleagues at Denver buyout firm KRG Capital, including its founder Mark King. King left KRG with Meyer and were joined by Simon Bachleda from Eos Partners.

What are you focused on?

From the beginning we tended to focus on healthcare investing because a lot of the deals we’d done historically were in healthcare and we had success in that area. At least three-quarters of the capital in the fund will be invested in health care.

How did you get started?

We built the team, put the infrastructure in place and started looking at deals. Before we had a fund in place, we did deals on a one-off basis. We used our money and capital from institutional partners both on the equity and the debt sides.

On a deal-by-deal basis, everybody investing has the ability to say yes or no, so we have to be super diligent and super transparent with the way we work with our partners. It forces discipline on us.

We had acquired a handful of companies outside of the fund. One of those companies was Accelecare, which we have exited. After Accelecare we bought five other companies. The other companies we had bought, we put into this fund.

So our debut fund, Revelstoke Capital Partners Fund I, has a position in the five subsequent investments: Schryver Medical, Transport, Crossroads, Encore and CareerStep. The fund had its final closing but it is roughly 30 percent invested already in those companies.

What is it like to fundraise for a first-time fund?

It’s certainly challenging. Even in good fundraising environments, the first-time fund is always challenging. In our case, although it was a first-time fund, we were not first-time fund managers.

Certainly Mark had founded and run KRG for several years. We are experienced individuals, so it was not our first rodeo in terms of running a fund or investing in leveraged buyouts. That was helpful in our fundraising.

Another thing was having done deals [on a deal-by-deal basis], people could see six deals we had done as Revelstoke. We had several name brand LPs in our first closing and that was helpful as we proceeded with the fundraising.

We have also been extraordinarily prolific providers of co-investment to our partners. Going forward, we’re going to need to do co-investment.

Do you think you’ll ever return to the deal-by-deal basis?

We would hope we can continue to raise funds and continue to operate in that fashion. But we are highly confident that, if we had to, we could go back and do it that way. Although it’s not in our plan, you raise capital more quickly that way.