The mission at Stonehenge Growth Equity, which recently raised $40 million to invest in Southeast technology and business services firms, can be summed up in how the firm hires people.
“If someone comes in here and says I want to work here because I want to make a lot of money, then we don't want you,” Stonehenge Growth Equity Managing Director Steve Lux says. “If you're not passionate about helping entrepreneurs, if you're not passionate about helping companies grow, then you're not for us.”
That passion play, Lux says, has never been truer than the current stage of Tampa-based Stonehenge, a Bank One spinoff founded in 1999. That's primarily because the firm closed on the $40 million portfolio, Stonehenge Growth Equity Fund LP, in late September.
Lux and Stonehenge Growth Equity Managing Director Brian Model raised the $40 million over 18 months, mostly from institutional investors. No entity holds more than 30% of the total fund. Private equity fundraising in a post-recession world, says Lux, is a challenge because many sources that invested in these opportunities in the past, such as pension funds, have significantly less capital.
Stonehenge Growth Equity is a unit of Stonehenge Capital Co. In addition to private equity and venture capital, Stonehenge Capital has divisions that focus on tax credit consulting and entertainment industry investments. Stonehenge Capital has eight offices nationwide, including Tampa, Dallas, Denver and New York City locations. The Tampa location for both the parent company and the equity fund is run out of a converted house in Hyde Park.
At $40 million, the latest fund isn't Silicon Valley supersized, Lux concedes. Still, $40 million is an above average size for Florida — either in private equity or venture capital. For instance, the $104.2 million Florida companies received in venture capital in the third quarter, through 12 deals, represents 1.3% of all U.S. venture capital, according to a PricewaterhouseCoopers/National Venture Capital Association report.
Lux, further, believes there's a gap in private equity, where Florida startups have little access to the biggest funds. That provides Stonehenge an opportunity, and a sense of urgency to find the best companies. The fund plans to invest in companies in Florida and the Southeast that have between $3 million and $20 million in annual revenues.
Finding the right companies, says Lux, is an intricate mix of numbers-based analytics, market research and compatibility and confidence with senior management. Lux says the firm is currently studying 10-15 potential companies. “We aren't going to bat a thousand,” Lux says. “But can we do well enough that we will be able to meet the goals we have set for our investors?”
Stonehenge has often hit that mark, although it declines to disclose its return target. Recent successes include Pilgrim Software and online education firm Red Vector, both based in Tampa, and West Palm Beach-based Electronic Data Resources. Those firms, and several others, grew revenues and profitability under Stonehenge before being sold.
The growth part is what motivates Lux. “I'm passionate about helping entrepreneurs achieve their goals and objectives,” says Lux. “Instead of being a builder and watching a building go up, you are helping build a business.”