The Riverside Co. has completed fundraising for the $50 million Riverside Acceleration Capital, the private equity firm’s first growth lending fund targeting software developers. This move underlines the growing interest in cloud services and also expands Riverside’s efforts into new markets, creating competition for venture capital firms.
The RAC fund, which began fundraising in January and has already made several investments, is committed to “making growth capital commitments to software companies without altering ownership or dynamics.” With the new fund, Riverside has invested in startups like Austin, Texas-based OwnLocal, a digital advertising platform for media publishing companies.
RAC fund manager Jim Toth says “The cloud has dramatically changed the way that businesses can scale today. With companies driving so much innovation, we thought there was room for innovation in growth financing as well – and that’s what we’ve set out to do with RAC.” Toth tells Mergers & Acquisitions that “the way we invest, it’s like we’re getting royalties and return is capped.” This is something that’s attractive to startups because “we invest in a different way that doesn’t dilute their ownership. The fund invests between $500,000 and $3 million.
Headquartered in Cleveland and New York, Riverside backs lower middle-market companies with a technology focus and recently closed its fourth micro-cap fund in September. The firm won Mergers & Acquisitions’ 2015 M&A Mid-Market Award for Seller of the Year, and also in 2014.