Gustavo “Gus” Alberelli, Managing Director at Trident Capital, speaks with GrowthCap’s CEO, RJ Lumba.Gus leads sourcing efforts and focuses on growth equity and buyout investments in Software, Internet, & Technology-Enabled Services. Below is the Q&A:
RJ: Can you tell us a little bit about your background as well as the types of companies you specifically target?
Gus: I’ve been investing in private technology companies since 2003, and I joined Trident Capital as a Managing Director in July 2012. Before starting my career as a growth equity investor 11 years ago, I worked for several years at an enterprise software startup and at a technology focused investment bank called Robertson Stephens.
My father was a “bootstrapped” entrepreneur for several years, so I grew up hearing about the challenges of building a company. Although my father never raised outside capital, in hindsight we both agree that he would have benefitted greatly from bringing in a strong investment partner.
Consequently, the US software & technology-enabled service companies I target have similarly raised little to no institutional capital and have revenues of at least $10 million.
RJ: Can you give a brief overview of your current firm, Trident, and its origins.
Gus: Trident was founded in 1993 with the purpose of being a specialist in enterprise software & services. We have then focused on a few key areas: IT Security, Healthcare IT, Financial technology, Internet AdTech, etc. Since inception we have raised just under $2 billion total across seven funds, and we are currently investing from our $362 million Fund VII.
RJ: What’s your typical investment?
Gus: Trident typically invests $10 to $50 million of growth equity capital into US-based companies with revenues ranging from $10 to $50 million. Trident seeks to be the lead, often first institutional, investor and targets businesses within our core focus areas that are breakeven or profitable with +25% or higher annual revenue growth. We’ll invest as both minority or majority shareholders and our capital usually goes towards one or more of the following: sales & marketing expansion, partial liquidity for founders or early shareholders &/or near-term acquisitions.
Following Trident’s initial investment, we work with our management teams as partners to generate high value outcomes through strategic repositioning, new product initiatives, team building, tuck-in acquisitions, and accelerated revenue growth. It’s probably also worth noting that Trident will invest throughout the US, not just in SF/Silicon Valley, New England & New York. In fact, just in our current fund we have already led new platform investments into companies HQed in Florida (2), Illinois, Missouri (2), North Carolina, Ohio & Utah.
RJ: You recently had a big win with one of your investments. Can you talk a little bit about that?
Gus: Sure. As large global enterprise companies have moved more of their information & applications to the Cloud, sophisticated cyberattacks such as Distributed Denial of Service attacks have increased in both size & frequency. A few months ago in Feb 2014 Akamai acquired one of my IT Security portfolio companies, Prolexic Technologies, the global leader in DDoS (Distributed Denial of Service) Protection & Mitigation.
Prolexic was headquartered in South Florida and first acquired in January 2008 by IPVG Corp, an investment firm publicly listed on the Philippine stock exchange. A very close friend of mine from Columbia Business School, I’m godfather to his oldest son, was IPVG’s Chief Investment Officer. Consequently, I visited Prolexic’s South Florida office several times from 2008-2011, and we talked about how to potentially co-invest in Prolexic together.
Prolexic’s CEO during that time had done a solid job profitably growing the business, but he was in his late sixties at the time and more interested in retirement than being the company’s full-time CEO going forward.
Fortunately, in 2010 I was introduced through a former investment banking colleague to Scott Hammack. Scott had been the CEO of another South Florida IT Security company called CyberGuard, which he successfully grew and eventually sold to Secure Computing for $295 million. I then spent most of 2010 recruiting Scott to join Prolexic as CEO and convincing my partners at the time that this relatively small South Florida company could become the market leader in DDoS.
Finally, in March/October 2011 I led a $12.9 million investment into Prolexic & joined the company’s Board of Directors. Scott Hammack joined as Prolexic’s CEO & invested a couple million dollars alongside us as well. Shortly after joining Trident, I invested an additional $22.5 million of growth capital into Prolexic on Trident’s behalf in July 2013. Although Trident does not publicly disclose its returns, I can confirm that all of Prolexic’s shareholders did quite well. In fact, one of Prolexic’s other Board Directors publicly disclosed the return details of my original 2011 investment prior to joining Trident: the $12.9 million I invested in March/October 2011 returned around $187 million, 14.5x, when Akamai’s Prolexic acquisition closed in Feb 2014.
Scott and the other members of Prolexic’s management team did an exceptional job of growing the company in a very capital efficient manner. In fact, there’s a piece of me that wishes we had not sold and continued on the path towards an IPO. Akamai acquired a great company and a fantastic team.
RJ: Those are fantastic results, congratulations! Can you tell us how many investments you’re looking to make over the next 12 to 18 months?
Gus: We are looking to do at least one new platform deal per quarter and possibly up to six per year. In addition, we are doing several tuck-in acquisitions for our portfolio companies every year as well.
RJ: Is there anything else in particular you’d like to highlight about Trident?
Gus: Over the past 21 years Trident has lived through several economic cycles. Trident’s a true partner to its portfolio companies in good times and bad times. Many investors are looking for a quick flip—that’s not us. As sector specialists, Trident will roll up its sleeves and work with management teams to build their businesses and that tends to resonate with entrepreneurs. Just last week we had a summit for our portfolio companies on best practices in marketing & inside sales and a separate event with several Fortune 2000 CIOs meeting a few of our portfolio companies.
I would encourage CEOs and founders to contact other CEOs &/or board directors of companies that a private equity firm has worked with to get a better sense of what they are actually like during good times and bad times before partnering.
RJ: Gus, thank you for your time. This is very informative for our readers, particularly for our CEO community as well as our LP subscribers who invest in growth equity funds.