Can you tell us about your background and path to joining Edison Partners?
Absolutely. I spent the first 20 years of my career working with high-growth tech companies, starting with Lotus/IBM. In spite of being a big corporation, it was a really innovative place. Over the years, I got to work on a variety of new products in many of the fastest-growing and most entrepreneurial parts of the business — that’s how I eventually caught the startup bug. From there, I went on to become an early hire at Groove Networks, a company that the founder of Lotus Notes launched and that I helped grow until it was acquired by Microsoft five years later.
After that, I continued working with a variety of high-growth tech companies from pre-revenue startups to fast-growing businesses scaling to $100 million in revenue. Edison Partners was an investor in one of those companies, which is how I first got connected to the firm. A few years later, I reconnected with Chris Sugden, who had recently become Managing Partner after taking over from Edison’s founder. He was looking to add operating expertise to the team, liked my go-to-market experience, and convinced me to join. That was nine years ago and I haven’t looked back since.
What is Edison’s investment thesis and how does it differ from other growth equity firms?
Our strategy is grounded in vertically focused capital-efficient growth. We invest primarily in B2B companies in fintech, enterprise software, and healthcare IT with between $10 million and $30 million in revenue, most of which offer verticalized solutions for large enterprise buyers. The companies we invest in are located outside Silicon Valley; primarily in secondary markets like the Midwest, Southeast, or right here in New Jersey. And while that geographic approach is one that many investors have adopted in recent years, it’s been our strategy since we opened our doors nearly 40 years ago.
In terms of our investments, we typically write checks in the $10 million to $40 million range and take anywhere from a 15 to a 60 percent ownership stake in the business. We’re currently investing out of a $450 million fund — our tenth — which brings our total assets under management to $1.6 billion.
I think you’d be hard pressed to find another firm with AUM and funds of our size that’s made more investments or offers their companies more value creation resources than we have. When you combine the characteristics of capital-efficient growth that we look for with our check size, revenue stage, geographic focus, and our team’s combination of investing and operating experience, it makes us pretty unique.
Edison’s roots are in venture capital, but you’re currently investing out of your third growth equity fund. Why did the firm make that pivot?
It was an evolution driven in part by historical investment characteristics and performance data and by the change in leadership. What the difference in strategy really comes down to is the fact that we no longer take the market or product risk of VC. Instead, as growth equity investors, the focus is on more mature businesses with product-market fit, strong momentum and only the execution risk (primarily, go-to-market execution risk) for scaling growth.
And how does Edison manage that execution risk?
Through our value creation platform, Edison Edge, which I joined the firm to build nine years ago. Today, it’s a robust set of five centers of excellence powered by 10 operating partners with expertise that spans go-to-market, finance, product and tech, leadership and people, and governance. Each center of excellence takes an adaptive, very people-first approach in working with CEOs and management teams. We offer playbooks, best practice frameworks, benchmark data, and various programming — all aligned with each company’s stage, sector, and operating needs. We also have a network of more than 120 board directors who are former executives from Edison companies or have worked on boards with us before, who serve on Edison boards with us and can plug into companies, as needed, based on their specific experience.
You mentioned Edison’s focus on capital efficiency. How does that marry with your preference for investing in companies in secondary markets?
To us, focusing on markets outside Silicon Valley goes hand in hand with capital-efficient growth.
To us, focusing on markets outside Silicon Valley goes hand in hand with capital-efficient growth. In our experience, companies that are located in secondary markets tend to be a bit more thoughtful with their capital and don’t have the growth-at-all-costs mindset that’s been the default for so many, particularly on the West Coast, in recent years. The entrepreneurs there are used to doing more with less and have either not raised capital previously or have raised less than they’re generating in revenue.
Unfortunately, the media tends to celebrate those who have raised the most or achieved the biggest valuations. What they should be talking about instead are the true heroes — the founders who’ve gone the furthest with the least.
Can you tell us about a couple of your recent investments and the trends or themes behind them that are guiding where Edison deploys capital?
Sure, there are quite a few. I’d say that anytime two of the three sectors we’re focused on come together, we get pretty excited. Personally, I like the intersection of enterprise software and fintech. A good example of an investment we made a little over a year ago at that intersection is a company called Solutions by Text. It’s basically a text messaging platform that ensures consumer finance companies remain in compliance with carrier and federal regulatory policy by, among other things, controlling who can be sent a text message, what message can be sent, and how frequently.
Obviously, text messaging isn’t new and having a piece of software that lets businesses text with consumers isn’t particularly innovative. But when you wrap that software in a strong set of rules and capabilities designed to ensure that consumer finance institutions can’t fall out of compliance with federal and carrier policy, it’s pretty differentiated. They’ve never had a customer fall out of compliance, which is critical in an industry where bad behavior can easily result in fines, lawsuits, and even getting shut down. No other company offers this kind of compliance-driven messaging.
The company is Dallas based, founder built, and hadn’t previously raised capital. We bought more than 60 percent of the business and have since helped them bring in an entirely new leadership team, accelerate growth by focusing upmarket, and become a true enterprise player. Fifteen months in and we’ve already seen several of their key growth metrics increase by 2-3x. This year, for example, we expect them to more than double the revenue they were generating at the time of our investment.
What other investments can you tell us about?
A more recent investment in the enterprise sector was in an Ottawa-based company called Field Effect that provides cybersecurity for SMBs. The thesis for this investment is that the SMB segment is largely underserved when it comes to cybersecurity. As a result, SMBs often have to operate without proper protection, struggle to manage overly complex tools, or have to spend beyond their means to get protected. For these reasons, we think the market for cybersecurity among SMBs is really fragmented in terms of what people are buying and why and how much they’re paying.
We love what the Field Effect team is doing. They have a great team, their tech is solid, and it’s a nice channel business. And they’re a shining example of a company that did a heck of a lot with a little prior to our investment.
Switching gears, if you could change anything about the culture in our industry, what would it be?
I think there are too many investors out there who are more focused on raising their next fund than building a strong culture and an enduring firm, which isn’t sustainable. I also often see silos between investors and value creation. Big firms go out and build these “value-add” teams, but they’re separate from the rest of the business. In my opinion, it all needs to be integrated so that you can offer founders a consolidated team where the investors and operators are on the same page, delivering a shared point of view.
Another thing I’ve noticed is that there’s what I’d call a “deal guy” culture rather than a team mentality. It’s often one person who runs a deal and brings things forward. Once it’s ready, that person brings a bunch of other people into a deal team, but it’s all very transactional. At Edison, we value teamwork and our companies appreciate this is how we work with them too. As an operator, that’s something I really value, and that I don’t see enough of in the industry.
Do you have any advice for other women looking to get into or grow their careers in the industry?
Sure, though my advice for women isn’t any different than for men. I think it’s important to be proactive, to ask questions, and to seek out whatever you need to grow within your firm. If you’re not already in the industry, don’t fall into the trap of thinking that you need to have an MBA or to have previously been an investment banker or management consultant to get a job. Plenty of investors come from other backgrounds. What’s more important, I think, is to have some exposure to the sector and/or stage that the firm invests in so that you’re bringing context to the table. This resonates with companies, too.