A Cherry Creek investment firm has launched its third fund.
Bow River Capital, which already manages a real estate fund and a buyout fund, this month said it closed a $160 million software growth equity fund. The firm has $850 million under management.
Managing Director John Raeder Jr., who formerly ran Denver startup TalentReef, said he and his partners expect to buy eight to 10 companies in the next few years that are based around the West.
He said Bow River is hoping to triple the value of the fund in about four years by finding promising software firms that bill clients on a regular basis (software as a service) and are profitable or close to breaking even.
“We don’t want companies that have significant burn rates or that have not proven out their value propositions to their customers,” he said, adding that Bow River is not looking to invest in business-to-consumer companies or health care companies.
Bow River will buy a majority stake of companies in the portfolio, and then take an active role in helping them grow by improving operations such as sales and marketing, Raeder said. The company takes the majority of board seats.
The first acquisition closed in April, when Bow River invested in AbsenceSoft, a Golden firm that sells software for HR managers to keep track of employees on leave.
Raeder stepped down as CEO of TalentReef in 2018 but previously built a similar fund called Raeder Ventures.
“I’ve not only had 20 years as a full-time CEO, but I also ran a fund since 1996,” he said, adding that his track record was annual returns of 63 percent in the last 23 years.
Bow River, which was a partner in its new office on the corner of Detroit and 2nd Street in Cherry Creek, charges investors on the so-called two and 20 model: a 2 percent fee and 20 percent of all profits.
The other principals running in the software fund are David Ramich, David Walters and Maitlan Cramer.