Wednesday, February 10, 2016

SSM Partners by Ed Nenon and Hunter Witherington

SSM Partners was founded in 1973 as a consulting firm working with family owned businesses on how to grow their company including acquisitions, growth strategies, and exits.  In the 1990s it transitioned into a direct investment firm with the same consultative, partnership approach.  Many of our investors then are still with us today.  Today we are investing out of our sixth fund.  We focus on a growth equity strategy and invest nationally but focus on the Southeast, Midwest, and Texas .  We partner with the entrepreneur and the management team to realize their full potential down the road through an exit.

Who is in your sweet spot?

We invest in businesses with $5M in revenue and up. The first category is software and technology, particularly recurring revenue B2B software businesses, which fits well with our Austin experience.  We spend about 1/3 of our time in healthcare IT and also healthcare services. Finally, we look at internet and e-commerce businesses as well. 

We’re looking for a proven product/service with a lot of customers who love it. In many cases they are increasing their spend on the product.  The proof it works is there.  They often have a unique differentiator that gives them a leg up.

Where do you invest in healthcare?

We focus on healthcare IT and services and have strong experience in the revenue cycle technologies.  We’ve taken a hard look at telemedicine and patient pay solutions as well. We do not invest in therapeutics or devices. 

So what kind of check size do you write?

Typically, our check size ranges from $5M to $15M.  We’ve done some north of that range where we partner on the funding. 

What stage do you invest in?

We invest in businesses with $5M in revenue and up.   A good number of our investments were bootstrapped and have not yet raised an institutional round though could have as the entrepreneur has built up a $5M to $10M revenue per year company.   We also invest in the more traditional path where the company has raised an institutional round and now they are looking to expand further and need another round of capital to grow.

How do you handle syndication?

In the last ten years, we’ve co-invested in about half of our deals. In syndication we want to make sure management and other investors are aligned especially on the company strategy, risk profile, and target exit.  Specific to SSM as part of a syndicate, we want a meaningful voice and impact in the company and so we’re typically leading or co-leading it with another firm; we don’t want to be $5M of a $75M round.  We’ll most often have a board seat and are active at the board level.

What Texas companies have you invested in?

Texas represents approximately half of SSM’s investing activity over our 20+ year investing history, about 14 of which are in Austin.  Dating back to the 90s, we were investors in 360Commerce, Dazel, Motive, and others; the three most recent Austin investments we made were All Web Leads, Bulldog Solutions, and New Era Portfolio. 

What did you think of Austin?

It’s been one of our best geographies for investing for a long time.  We have a great network here that continues to develop and evolve. We would like to spend more time there.  We’ve had good success in finding quality people, investment opportunities, and successful exits.