This private equity firm is sharing returns with portfolio company employees
When a record number of people are quitting their jobs, it may help to give employees a stake in the company they work for.
It’s a major reason that health care-focused private equity firm InTandem Capital Partners earlier this year committed to share a portion of its returns with portfolio company employees.
“People should share in the success that they helped create, and we were finding different ways of doing that,” says Elliot Cooperstone, founder and managing partner of InTandem. “But when we took a hard look at the way equity plans are structured—not just in companies we own, but I would say across private equity—generally those structures don’t match up with that philosophy.”
The firm is allotting some 5% of equity gains to employees who are not already shareholders in the company, based on how much time they’ve worked at the portfolio company since InTandem Capital Partners first invested. When the firm sells the portfolio company, or there is a recapitalization, those employees will get to participate in that—not just the management team. The 5% figure may fluctuate based on company size or structure. Regardless, the idea is to make employees become co-owners, to motivate them to do better work and encourage them to stay at the company longer.
“We think that by engaging all employees as owners in the company, we will have an easier time recruiting great people, retaining great people, motivating them and as a result, and generating better financial results over time,” says Cooperstone.
Ultimately, LPs agreed with the thesis, though initially there may be risk of cutting into returns for all shareholders. University endowments, charitable foundations, and some pension plans were motivated by the social good aspect of it. But Cooperstone says the main selling point is that there is a really strong business case to be made.
InTandem laid out its data and projections to LPs, Cooperstone says. Worst case scenario—meaning that the allocation has zero impact on employee productivity or retention—the decrement on multiple on invested capital would only be a few tenths. The decrement on IRR was “barely a percentage point.” If employees were motivated by it, the financial impact could be significant.
Cooperstone says the firm is currently in the process of rolling out the compensation structure to all of its portfolio companies, and it has yet to see the immediate financial results—but initial responses from limited partners and management teams have been enthusiastic.
“It’s still early days in terms of being able to distribute checks, but I’m looking forward to those days coming,” Cooperstone says, noting he hopes other private equity firms will follow suit.
Roe v. Wade… It would be difficult not to mention the leaked initial draft Supreme Court opinion that Politico published yesterday evening, which suggests that the landmark Roe v. Wade decision (which guaranteed constitutional protections of abortion rights) will be overturned. While the decision is not yet final and there is still time for justices to change their votes, likely in the next two months, the ruling would reverse a 49-year precedent and allow each state to determine whether to restrict or ban abortion. You can read more about this in today’s Broadsheet newsletter, and you can read the full initial draft in Politico.
Jackson Fordyce curated the deals section of today’s newsletter.
- Point, a Palo Alto, Calif-based fintech company and home equity platform, raised $115 million in additional Series C funding led by WestCap and was joined by investors including Andreessen Horowitz, Ribbit Capital, Redwood Trust, Atalaya Capital Management, DAG Ventures, Deer Park Road Management, The Palisades Group, and Alpaca VC.
- Teleport, an Oakland, Calif.-based identity-based infrastructure access management provider, raised $110 million in Series C funding led by Bessemer Venture Partners and was joined by investors including Insight Partners, Kleiner Perkins, and S28 Capital.
- kevin., a Vilnius, Lithuania-based payments infrastructure company for online and in-store sales, raised $65 million in Series A funding led by Accel and was joined by investors including Eurazeo, OTB Ventures, Speedinvest, OpenOcean, Global Paytech Ventures 20VC founder Harry Stebbings, CEO & co-founder of Supercell Ilkka Paananen, former CEO of Venmo Amitabh Jhawar, and other angels.
- Traceable AI, a San Francisco-based API security company, raised $60 million in Series B funding led by IVP and was joined by investors including BIG Labs, Unusual Ventures, Tiger Global Management, CISO angel investors.
- Veza, a Palo Alto, Calif.-based data security platform, raised $50 million in Series C funding led by Accel.
- Healthmap, a Tampa, Fla.-based kidney population health management company, raised $35 million in funding led by GuideWell and Highmark Ventures and was joined by investors including Windrose, DCHP, Shulman Ventures, and others.
- Rise Up, a Paris-based employee learning software solution, raised €30 million ($31.6 million) in Series B funding from investors including Connected Capital, MAIF Avenir, and Impact Partners.
- Sealed, a New York-based climate tech company focused on home energy waste, raised $29.5 million in Series B extension led by Fifth Wall Climate Tech and was joined by investors including Robert Downey Jr. 's FootPrint Coalition, CityRock Venture Partners, Cyrus Capital, and Keyframe Capital.
- AutoRABIT, a San Francisco-based Salesforce DevSecOps (development, security and operations) platform provider for regulated industries, raised $26 million in funding from Full In Partners.
- Phylum, an Evergreen, Colo.-based supply chain cybersecurity platform, raised $15 million in Series A funding led by ClearSky and was joined by investors including Atlassian Ventures, SixThirty Ventures, First In, and TechOperators.
- Ownwell, an Austin-based property tax management services company, raised $5.75 million in seed funding led by First Round Capital and was joined by investors including Wonder Ventures, Founder Collective, Long Journey Ventures, and former PayPal board member Scott Banister.
- Stakes, a New York-based Web3 social wagering platform, raised $5.3 million in seed funding from investors including Digital Currency Group, FBG Capital, CMS Holdings, LD Capital, Cadenza Ventures, Matrixport Ventures, and Sterling Select Group.
- RideTandem, a London-based shared-transportation startup, raised £1.75 million ($2.2 million) in seed funding led by 1818 Venture Capital and was joined by investors including Conduit Connect, Low Carbon Innovation Fund, Ascension, Seedrs, and angels including the founders of Allplants and OLIO.
- Upgrade, a Houston-based wig and supporting resources marketplace, raised $1 million in seed extension funding from investors including ANIM, Logitech CEO Bracken P. Darrell, The Artemis Fund, and Mercury Fund.
- Astorg Partners plans to acquire CordenPharma, a Plankstadt, Germany-based contract drug development and manufacturing company, for $2.6 billion.
- Stonepeak made a minority investment in Inspired Education Group, a London-based group of international private schools, for €1 billion ($1.055 billion).
- Fourshore Partners acquired Celtic Capital Corporation, a Calabasas, Calif.-based financial services company. Financial terms were not disclosed.
- IQ-EQ, backed by Astorg, acquired Davy Global Fund Management, a Dublin-based fund management business. Financial terms were not disclosed.
- Mercer Global Advisors, backed by Oak Hill Capital and Genstar Capital, acquired HYA Advisors, a Springfield, Mo.-based wealth management firm. Financial terms were not disclosed.
- MissionWired, a Stone-Goff Partners portfolio company, acquired Chapman Cubine Allen + Hussey, an Arlington, Va.-based direct marketing firm for nonprofits and political clients. Financial terms were not disclosed.
- PrimeSource Brands, backed by Clearlake Capital, acquired Axxis, a Schaumburg, Ill.-based fastening tools and collated fasteners provider. Financial terms were not disclosed.
- VCM Products, backed by Rock Mountain Capital, acquired Vic West Brands, an Austin-based D2C online pest control manufacturer. Financial terms were not disclosed.
- Summit Fire & Security, a subsidiary of SFP Holding, backed by BlackRock Long Term Private Capital, acquired Protegis Fire & Safety, a Cleveland, Ohio-based installation, inspection, service, and repair for fire alarms, fire sprinkler systems, security systems, fire pumps, extinguishers and fire suppression systems provider, from Align Capital Partners. Financial terms were not disclosed.
- SyBridge Technologies acquired Wachusett Precision Tool, a Southfield, Mass.-based design, production, tooling, and molding services company. Financial terms were not disclosed.
- Truist acquired Long Game, a San Francisco-based gaming finance mobile app. Financial terms were not disclosed.
- ZoomInfo acquired Comparably, a Santa Monica, Calif.-based recruitment marketing and employer branding platform. Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
- Catalio Capital Management, a New York-based investment firm, raised more than $381 million for a third fund focused on biomedical technology companies at all stages of growth.
- Home Depot Ventures, the Atlanta-based venture capital arm of Home Depot, allocated $150 million for a fund focused on early-stage retail and home improvement companies.
- Hetz Ventures, a Tel Aviv-based venture capital fund, raised $123 million for a third fund focused on seed and pre-seed investments in Israeli fintech, enterprise/data software, DevOps, open-source software, and cybersecurity companies.
- Sheva, a Tel Aviv-based venture capital fund, raised $50 million for a fund focused on pre-seed, seed stage, and Series A investments.
- Blackford Capital, a Grand Rapids, Mich.-based private equity firm, promoted Paul Doyle to managing partner.
- Piva Capital, a San Francisco-based venture capital firm, promoted Maria Buitron to principal.
- QED Investors, an Alexandria, Va.-based venture capital firm, hired Victoria Zuo as principal. Formerly, she was with Gradient Ventures.