Top 8 Leading Investment Firms Setting Their Sights on Software Companies

In the modern world, nothing happens without software. Software is now present in crucial components of almost everything. Global organizations and consumers are growing increasingly reliant on software as developers focus on Machine Learning and the Internet of Things. After a downturn in 2020, the software industry is on track to record high investments, with many investors storming back into the realm of enterprise tech. At the same time, software businesses are increasingly preferring private ownership with partners who can take a long-term view.

The sheer number of software providers presents a major opportunity that allows investors to beef up their portfolio companies with a more robust suite of products or customers. As software has continued to perform well, more investment firms are piling in. For that reason, software company founders and management teams looking to secure capital should look closely at investment firms. Whether it is funding for growth, exiting the company, or taking on a strategic investment partner, PE and VC firms might be your optimal option. 

Now let’s take a look at our list of 8 leading firms that are investing heavily in technology and have a strong track record with software companies!

#1. Accel-KKR – A True Entrepreneurial Partnership Builder

Founded in 2000, Accel-KKR is a technology-focused private equity firm specializing in growth and middle-market investments and grows as one of the most active investors in the software and tech enabled services sector. The firm invests heavily in enterprise software including customer relations and human capital management software, enterprise resource planning software, supply chain management software, payments, and billing software, and numerous other B2B software categories.

Accel-KKR’s culture is built on a strong work ethic and drive to succeed and is one that values integrity and collaboration. At its core, the firm’s investment strategy is a commitment to developing strong partnerships with the management teams of its portfolio companies and a focus on building value through significant resources available through the firm’s network. It also has a proven track record of acting quickly, being flexible and following through on its commitments once it identifies businesses that have strong fundamentals in our targeted space.

Some of its outstanding portfolio companies include Abrigo, a leading technology provider of compliance, credit risk, and lending solutions; ATP, a global information services and software solutions company; Captify, the leading Search Intelligence Platform for the open web; Enmark, which serves the metal service center industry with the latest technology to enhance operations; Unimarket, which makes procurement simple with an easy-to-use cloud-based solution that connects an extensive catalog-driven supplier marketplace; etc.

#2. Alpine Investors – Taking Businesses to New Heights with People-Driven Approach

Founded in 2001, Alpine Investors is a people-driven private equity firm that specializes in lower middle-market companies in the software, online, and business services industries with a mission to build enduring companies. The firm invests in exceptional people to create exceptional companies. Since its founding, Alpine has believed that inspiring growth in people is the soundest way to build growth and revenue. It starts within our own offices and shares its learnings with its portfolio companies.

Alpine Investors’ PeopleFirst operating philosophy guides everything the firm does. This philosophy comes to life in every aspect of the firm, from recruiting, to building engaged cultures, to being a force for good in the world. When the firm sets out to buy a new company, its first step is a conversation with the founder. It aims to understand the early vision, goals for the future, and the culture that’s led to success so far. Then it builds on that strong foundation, setting founders up for their ideal next step. 

Some of its outstanding portfolio companies include ASG, a software business that buys, builds, and operates market-leading vertical SaaS companies; Innovative Systems, an enterprise software solution that enables independent service providers to manage their business; EcoInteractive, a leading provider of software as a service solution in funding, budget and project management; extendedReach, which provides Electronic Health Record software for Human Services agencies; e-Courier, an enterprise software solution provider for last-mile delivery couriers; and many others.

#3. Argentum – A Supportive and Value-Added Partner

Founded in 1988, Argentum is a New York based private equity firm that provides expansion capital to rapidly growing small and mid-sized companies, focused mainly on B2B software and tech-enabled services. The firm targets bootstrapped companies that can scale with modest levels of capital, filling the gap between early-stage VC and later stage PE as it understands the unique challenges faced at this stage of a company’s lifecycle. Since raising its first fund in 1990, Argentum has invested in over 85 companies and supported over 200 add-on acquisitions.

The firm takes shared ownership for value creation, actively originating and executing strategic initiatives, customer relationships, and acquisitions on behalf of its companies. It implements the “Argentum playbook” to build best practices, financial reporting & KPIs, banking & audit relationships, and executive teams. Argentum has been instrumental in assisting and supporting many companies’ transitions from a small, emerging player, to an innovative global industry leader. Argentum understands businesses and knows how to embrace their vision, helping them achieve successful outcomes.

Some of its outstanding portfolio companies include AFS Technologies, a provider of enterprise and on-demand software solutions to the F&B industries; Aventri, a global provider of event management software; Cyclone Commerce, an enterprise software company providing solutions that allow companies to connect with their partners; Fleetworthy, a provider of cloud-based compliance and risk mitigation software, data visualization solutions, and tech-enabled services for commercial fleets; Impact Analytics, an software solutions company that provides planning, merchandising and forecasting tools; and many others.

#4. Battery Ventures – A Backer for Businesses at All Stages of Growth

Founded in 1983, Battery is a global, technology-focused investment firm with its core focus areas including application software, infrastructure, software, consumer, industrial tech. At Battery, the stage-based approach was developed to provide valuable assistance throughout a company’s journey whether it’s assistance with early market validation or expanding into new customer segments, channels, or markets. Battery maintains a deep bench of ex-operators and growth specialists who can mentor its portfolio CEOs and advise them on issues relating to leadership and growth in various market environments.

Battery’s deep expertise in software spans several decades and multiple technology eras—but has always been forward-thinking. We seek out innovative software companies globally at all stages of maturity, from seed to buyout, and have backed some of the industry’s most iconic names. Our team looks across horizontal business functions—sales and marketing, finance, HR—and into often-undiscovered, vertical industry niches to ferret out the best opportunities and help build disruptive businesses.

Some of its outstanding portfolio companies include AuditBoard, a SaaS technology company revolutionizing enterprise audit-management software; Bazaarvoice, which offers outsourced technology, services, analytics, and expertise; BlueKai, a data-management platform that helps customers connect all data assets and put them to use; Boost Media, a creative optimization platform for marketers managing search, social, video or display advertising; CAMBRIO, which designs, develops, and delivers CAD/CAM software; and many others.

#5. Blue Cloud Ventures – Working Hand-In-Hand with Talented Entrepreneurs

Founded in 2012, Blue Cloud Ventures started as a venture growth fund to work with exceptional founders and entrepreneurs building disruptive cloud-based software companies. Along the way, the firm assembled an incredible team of talented individuals, were fortunate to work with exceptional founders to push harder and collaborated with some of the best minds and VCs in tech. Going through the challenges and growing pains of building a business has helped the firm relate to its founders and understand firsthand the grit and dedication needed to succeed.

Blue Cloud Ventures invests in leading, fast-growing enterprise software companies that are solving critical enterprise pain points, have a highly defensible competitive advantage, and are tackling large addressable markets. Its investment strategy centered on speed and flexibility. The firm is not hung up on the amount invested, ownership requirements or board representation. As a small close-knit partnership, it  makes decisions thoughtfully and is mindful of the time entrepreneurs spend away from their core business while fundraising.

Some of its outstanding portfolio companies include AFS Technologies, which develops software solutions to support consumer goods companies; Beyond Trust, a cybersecurity company that provides privileged-access and vulnerability management software; Cityworks, a developer public asset and land management software; Conductor, a search and content intelligence platform that helps marketers create and optimize content; Iterable, an omni-channel enterprise marketing automation software platform; and many others.

#6. Five Elms Capital – A Software-focused and Culture-obsessed Partner

Founded in 2007, Five Elms is a global growth equity firm for fast-growing businesses, focused exclusively on software investing. This specialization has helped it build an unmatched network and deep domain expertise. Founders can supplement their industry knowledge with the firm’s experience in helping accelerate growth, overcoming positive and consistent challenges tied to scale, and de-risking the path to a successful exit for all stakeholders. The firm’s goal is to provide its companies the resources and expertise to supplement their already successful organization and to assist in more rapidly achieving organizational goals. 

Five Elms is interested in partnering with founder-owned, bootstrapped businesses, working alongside management to accelerate growth and continue to build industry leading businesses without pushing companies to grow at all costs or raising mega rounds of capital. It takes partnerships seriously and will work its tails off to help companies succeed. The firm’s relaxed, open, and honest working style is one of the reasons it has been successful earning founders’ trust and a seat at the table in profitable businesses where additional capital is optional.

Some of its outstanding portfolio companies include FMX, a provider of facilities management software solutions; OpenReel, the leading remote video creation platform empowering enterprises, media, and entertainment companies to direct and film; Outfit, a SaaS provider of enterprise brand management solutions; Deepcrawl, which offers the complete end-to-end technical SEO platform with the tools and integrations; Panopto, a software company that provides lecture recording, screencasting, video streaming, and video content management software; and many others.

#7. NexPhase Capital – A Thematic and Operationally-Focused Firm

Founded in 2007, NexPhase Capital is an operationally-focused private equity investment firm targeting entrepreneur-owned, lower middle-market companies operating in software, healthcare and consumer sectors. The firm partners with companies that are seeking a value-added partner in order to navigate the “next phase” of their growth. With each of its partner companies, the firm seeks to unlock their intrinsic value through the systematic application of the NexPhase Value Creation Playbook which begins during due diligence when it identifies specific, actionable enhancement initiatives which form the basis of the post-close strategic plan.

According to NexPhase, the software sector has experienced incredible growth, driven by companies that develop solutions to manage data, revenue, analytics, and insight. Within this sector, the firm focuses on businesses with leading products which benefit from thematic tailwinds identified by its investment team. It helps management teams grow these businesses into high-caliber companies via both foundational and growth investment activities. At NexPhase, software focus areas include insurance, state and local government, education, financial services.

Some of its outstanding portfolio companies include Selerix Systems, a provider of SaaS-based benefits administration software to stakeholders across the employee benefits value chain; KnowFully, an educational technology platform serving the accounting, finance, and healthcare industries; DealerOn, a provider of cloud-based digital marketing technology for the retail automotive industry; Clearway Pain Solutions, a provider of multidisciplinary interventional pain management services; Meduit, a provider of patient-focused revenue cycle management solutions for hospitals and healthcare providers; and many others.

#8. Strattam Capital – Bringing More to the Table than Just Capital

Founded in 2013, Strattam Capital is focused exclusively on private equity investments in core enterprise information technology and services, targeting companies that have developed a high-quality product and strong market position, but need additional resources to scale. Since its inception, the firm has built its business working with many passionate entrepreneurs who know that enduring partnerships require respect and honesty. Strattam’s investment approach is rooted in the belief that successful private equity relationships demand both collaboration and transparency.

Aligning in advance requires a significant amount of time and effort that most firms wouldn’t dream of investing before the deal is done, but Strattam is not most firms. Knowing the effort pays off, the firm makes its CEOs feel empowered with a crafted plan that is essential to ensuring long-term success. It’s something the firm creates up front, working directly with founders, before binding commitments are made. Strattam values strong partnerships, so its experts work beyond the investment to become high-value resources that help management teams thrive.

Some of its outstanding portfolio companies include Acendre, a leader in secure, cloud-based talent management software for regulated industry verticals; Contegix, which makes life easier for developers and IT teams with fully-managed cloud solutions; MHC, a leader in enterprise content automation and document management software solutions; NETSTOCK, a provider of inventory planning and optimization software; Rock Solid, a leading software and IT services company that provides solutions that facilitate the connection of citizens with government; and many others.

The Bottom Lines

If handled well, a partnership between software companies and investment firms would turn out to be very successful. However, if approached incorrectly, PE and VC firms can be a risky way of raising capital. Therefore, the key takeaway is that keeping your targets and goals realistic and having a good preparation is vital for all aspects of a deal.