Building on the success of its $75 million Fund I, Solana Beach-based Blueprint Equity announced Feb. 25 it had closed on a $175 million Fund II.
Blueprint’s strategy for Fund II will be much the same as with Fund I, but with “a bigger team and more deals,” said Blueprint Managing Partner Sheldon Lewis.
Blueprint will focus on investing in B2B software, fintech and tech-enabled services companies that are doing $1-7 million in annual revenue and are “growing quickly” and where Blueprint is the “first institutional capital,” Lewis said.
In Fund I, Blueprint made investments in the range of $3 million to $10 million. Fund II will up that range to $5 million to $15 million.
According to Cambridge Associates data, Blueprint Equity’s 2019 vintage Fund I is performing in the top 5% of funds in its category.
Blueprint hasn’t fully exited Fund I but has successfully sold portions of two businesses and liquidity proceeds of those “were very significant,” Lewis said, adding that the success of Fund I made a significant difference in raising capital for Fund II.
“It’s been tremendous. It’s a whole different world,” he said. “Fund I took us awhile to raise. That’s typical, but it was a slog. It was extremely hard. With Fund II, we had $125 million on the cover, $150 million hard cap. We ended up having over $340 million in demand, so we did end up bumping our hard cap to $175 million. And we were able to raise that from start to finish in less than two months.”
Lewis said Fund II includes a mix of “great investors, a lot of institutional Fund of Funds, endowments and some well-known family offices and high net worth individuals.”
“Our fundraise is a testament to the strength of our team and our investment strategy. We are excited to have the continued support of our existing investors and to have attracted top-tier institutions in our Fund II,” said Bobby Ocampo, managing partner at Blueprint Equity. “You are only as good as your next deal. Even though our Fund I results have been exceptional thus far, there’s a lot work left for us to do and we are hungry to prove it again in Fund II.”
Blueprint’s hunger to prove itself with Fund II will include providing capital for 14 to 15 companies – up from the eight for Fund I. The almost doubling seems like a large step, but according to Lewis it could have been a much larger leap that would have come with some undesirable changes for the early growth equity company.
“Even though we had the demand, we didn’t want to raise a $340 million fund because all of it sudden it changes the types of companies you invest in because then you have to compete with all the folks, quite frankly, we want to sell our businesses to,” he said. “The minute you get too big, you have to start cutting these large checks to later stage businesses because the math just doesn’t work if you’re trying to invest in the stage and size of company we are.”
Another reason for not growing the fund too large is that Blueprint likes to be “hands on” with the companies it invests in and will be using part of the money in the fund to build out an operations team.
“We want to hire someone to just focus on hiring for portfolio companies, like an in-house recruiter. We want to hire someone who is just focused on building out sales and marketing within an organization; someone who is just focused on business development and [mergers and acquisitions],” Lewis said. “It’s rare for a firm our size to add operational value to these companies. It’s usually, ‘Here’s the money, I’ll phone into the next board meeting and good luck.’
“For us it’s the opposite,” he continued. “We’re on calls with the entrepreneurs constantly. We roll up our sleeves and take a lot of the heavy lifting and we have a laundry list of things we can help with.”
And there is one more goal Blueprint has for Fund II – more local investment.
“San Diego is a number one priority for us from an investment standpoint,” Lewis said, adding that it is a “bummer” that no local San Diego companies have been added to Blueprint’s portfolio. “We definitely want to change that with Fund II.”
Managing Partners: Sheldon Lewis, Bobby Ocampo
Headquarters: Solana Beach
Notable: Blueprint Equity’s Fund I is in the top 5% of performing funds according to Cambridge Associates data.