Deal land is complicated. And it's especially complex for long-time investors who have decades of relationships strung across the country and stakes in a small mountain of companies. But, with that, comes opportunities.
That's the case for Chris Pacitti. While he remains a general partner at Austin Ventures, he is simultaneously managing a growing stable of investments for his new private equity firm, AVX Partners, which he launched in 2015. AVX has essentially set up a model where Pacitti can tap into a network of wealthy individuals who trust him to make smart growth equity investments, typically in high-potential B2B software companies raising a second or third round of capital.
So, when Pacitti learned TaskTop, a Vancouver-based software company, was looking to raise a new round of funding -- and had a last minute opening for a lead investor, Pacitti jumped on it. He was already familiar with the company since Austin Ventures had invested in Tasktop's prior round. And he knows the COO, Neelan Choksi, who lives in Austin.
Since Austin Ventures was already involved, Pacitti told me he had expected to avoid an AVX Partners investment to avoid any conflict of interest. But when the lead investor spot became available, Pacitti saw an opportunity for AVX to lead the deal with Austin Ventures making a follow-on investment. (Austin Ventures stopped making new early-stage investments in 2015.)
AVX Partners invested $8 million of Tasktop's $11.3 million second round of investment. The remainder was covered by Austin Ventures and Yaletown Partners. Tasktop, which has a small, sales-oriented U.S. headquarters in Austin, says it plans to use the money for go-to-market development, marketing and sales.
Tasktop is AVX's fourth investment, and the first in a company not based in Austin. The others are Vyopta, an Austin video conferencing analytics company; Vapor, an Austin-based cloud computing software company; and Predictive Science, an Austin-based data management company.
Pacciti told me that although prior investments have been in Austin companies, his approach is agnostic to geography. AVX aims for deals of $6 million to $8 million. He tries to find software companies that have a proven product and appear poised for a strong exit - but still haven't raised huge amounts of money.
"I tend to focus on companies I think are optimized for all potential outcomes in the software exit universe, at least," Pacitti said.
That means when he's exploring companies, he's looking for the type that is a step or two away from being an attractive acquisition opportunity for big-time private equity firms like Vista Equity Partners and Thoma Bravo. And Pacciti has the track record at Austin Ventures that shows he has a strong sense of which software plays are likely to bring big returns.
"I want better optionality," he said. "So I look for companies that I can sell to the broad universe of acquirers."
