Summit Partners races through dual fundraise

The firm has collected $1.8bn for its eighth growth capital fund, targeting $3bn, and is close to closing its third venture fund, targeting $500m. The funds, which are linked, were launched in March.

Summit Partners has collected about $1.8 billion for its eighth growth investment fund that is targeting $3 billion, a person with knowledge of the fundraising told Private Equity International.

The firm declined to comment about fundraising.

Summit Partners Growth Equity Fund VIII launched in March and could close by September. The fund is linked to the firm’s third venture capital fund, which has almost reached its $500 million target and will likely be oversubscribed, the person said. Summit Partners Venture Capital Fund III could have closed already, but the firm is keeping it open for some last-minute LPs, the person said. That fund is expected to close by the end of July.

The firm closed its previous growth fund closed on $3 billion and its prior venture fund closed on $310 million, both in 2005. Fund VII was generating a modest 1.30 percent internal rate of return, and the second venture fund was generating an 8.68 percent IRR, both as of 30 September, 2010, according to performance information from the California State Teachers’ Retirement System.

While Fund VII has yet to prove itself, that hasn’t stopped LPs from committing to the new fund, in part because of the strong track record of Summit’s earlier funds, according to one LP who has committed to the new funds.

“They are mainly first quartile; they have a long track record,” the LP said.

However, one LP who has looked at the dual fund offering said the firm’s recent performance has been ok, but not spectacular, especially compared to earlier funds.

“[LPs] will still [commit]; they’ll ignore recent history and say, ‘we think they’ll be good funds’,” the LP said.

Summit was founded in 1984 and has raised some $11 billion and invested in 300 companies. The firm has 85 employees in offices in Boston, Palo Alto and London. Summit manages private equity, venture capital and subordinated debt funds.

The firm added 13 portfolio companies last year, the bulk of which were tech focused, including Accedian Networks, Avast Software, Netwitness, Wildfire Interactive and Winshuttle. Earlier this year, the firm invested an undisclosed amount in Clearwater Analytics, a web-based investment reporting company.