Camber Partners Raises $100M for Stranded SaaS Acquisitions

The Shifting Landscape for Enterprise Software Companies

Over the past few years, companies specializing in enterprise software have experienced unprecedented growth and valuation. However, a significant number of startups fail to achieve comparable success, often remaining stagnant while their venture capital investors—who are frequently reinvesting in newer ventures—shift their focus.

Options for Stranded Companies

This situation leaves many thousands of companies in a precarious position with limited choices. Companies can choose to cease operations entirely. Alternatively, some may opt to repurchase their outstanding shares. A further possibility involves selling to a private equity firm, potentially as part of a larger consolidation strategy or to complement existing assets.

The substantial opportunities available to PE firms are underscored by reports from the Financial Times, indicating that Thoma Bravo, a software-focused buyout firm, intends to raise up to $35 billion for its subsequent fund.

New Entrants into the Market

It’s not only established firms recognizing this trend. Camber Partners, a San Francisco-based growth equity firm established last year by investor Scott Irwin—previously with Rembrandt Venture Partners—is also entering the arena.

Camber Partners' Strategy

Camber Partners has recently announced the launch of a $100 million debut fund. The fund’s objective is to acquire—or secure a majority stake in—struggling SaaS companies. These companies will then be revitalized using Camber’s proprietary data science technology, with the aim of resale within approximately five years.

Addressing Venture Capital Incentives

Irwin explains that the founding of Camber Partners stemmed from dissatisfaction with the current venture capital landscape. He believes that startups are often pressured to scale at an unrealistic pace to satisfy the demands of VCs seeking substantial returns on their investments.

He expresses frustration with “detrimental incentives,” stating that 100% growth is often considered insufficient, with expectations frequently exceeding 200%. Similarly, generating $100,000 in monthly revenue is deemed inadequate; a million dollars is the target. A capable management team focused on sustainable growth is often overlooked in favor of rapid expansion and the recruitment of highly experienced personnel.

The Risks of Rapid Scaling

While some ventures have achieved “remarkable successes” through this model, Irwin notes that the “failure rate is considerably higher.”

The Gemini Data Platform

Irwin, alongside co-founder and experienced operator Jason Hable, and Scott Ernst, Camber’s VP of data and engineering, has developed a data platform called Gemini. This platform is designed to identify companies globally that fit a specific profile and then facilitate their growth. Ideal targets are those with a “highly regarded product” and “robust, organic inbound” interest from potential clients.

These companies should be generating between $3 million and $10 million in annual recurring revenue and seeking to improve an “inefficient go-to-market” approach.

Identifying Suitable Investments

“If a company believes it hasn’t fully unlocked its growth potential, that’s a strong indicator of a good fit,” Irwin states.

Initial Investments

Camber Partners has already invested in two companies: Scout APM and SE Ranking. An $8 million investment secured a majority stake in Scout, a provider of application performance software, along with its related business, ExceptionTrap.

The terms of the deal with SE Ranking, an SEO software company, have not been disclosed, but Irwin indicates that typical investments will range from $10 million to $25 million.

Fund Deployment

Camber Partners anticipates investing in six to seven companies with its initial fund.

Exit Strategies

Regarding potential exits, Irwin expects outcomes similar to those commonly seen in the SaaS sector, including sales—either complete or partial—to financial sponsors such as Thoma Bravo or Vista Equity Partners. In favorable circumstances, initial public offerings are also a possibility.

Realistic Return Expectations

“We don’t require exceptionally high returns,” Irwin emphasizes. “Our goal is to align with a team where a $200 million exit is transformative and provides a substantial return for all stakeholders.”

Navigating Market Pressures

Achieving this can be challenging in the current fast-paced market.

“The advantage of private equity interest is that if investors are willing to accept a buyout offer and the management team desires to continue operating, a mutually agreeable solution can be reached,” Irwin explains. “The difficulty arises when investors dismiss a $200 million exit as insufficient, demanding a billion-dollar outcome, which ultimately leads to failure.”