Private Health Investor: Catalyst raises $377m Fund IV in three months


Catalyst raises $377m Fund IV in three months
By Gretchen Goetz

Growth equity firm Catalyst Investors has closed its fourth fund on $377 million.

New York-based Catalyst, which invests in technology-enabled services, began fundraising in January with a target of $350 million and held a final close three months later on March 31.

“We were in and out of the market pretty quickly,” Brian Rich, Catalyst co-founder and managing partner, said in an interview. “We had a really good return rate of our existing LPs and then we have a few new ones who had been watching us for a while.”
The fund’s investors are predominantly institutional, and include funds of funds, insurance companies and state pension plans, according to Rich. Between 10-15 percent of capital commitment for the fund, Catalyst Partners IV, came from family offices, and less than 10 percent came from high net worth individuals.

Catalyst generally makes growth equity investments in companies with an enterprise value of between $50 million and $150 million, said Rich, with some companies outside this range. The firm is looking to invest this fund in deals of between $10 and $60 million. It will focus on three main areas: business and consumer services, such as digital media, eCommerce and healthcare IT; cloud computing; and communications infrastructure, such as wireless towers and data centers.

The firm has already made one investment from Fund IV. In March it used capital from the fund to buy a stake in wireless tower construction and operating company IWG II Holdings. Its next investment will likely be in a telemedicine company, according to Rich.

Healthcare IT is an appealing space right now, he said.

“You definitely have the wind at your back. There are fairly archaic systems out there that it’s just easier to replace with a cloud-based solution. If you pick your spots very carefully then you have great opportunity to grow these businesses.”

The firm is currently invested in Clinicient, a software company that offers revenue management cycle solutions to outpatient rehabilitation practices. It also has a stake in MINDBODY, which makes client management software for fitness companies such as gyms and yoga studios.

The firm is optimistic about the climate in which it will be investing Fund IV.

“I think it’s a really good time. You’ve got to be careful on selection and pricing, as always, because it’s a very hot market, but I think it’s a really good time in our space to be finding these kinds of companies,” said Rich.

Catalyst’s last fund, 2012-vintage Catalyst Partners III, closed on $213 million after having an initial target of $250 million.

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