Channel Equity Partners: Inside San Diego's New Early-Growth Fund and its Pitch to LPs
Led by former TVC Capital investors, the San Diego-based firm plans to invest in business-to-business (B2B) software companies at the Series A stage.
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In April, Channel Equity Partners completed the first close of its debut fund, becoming one of the region's latest investment funds to open its doors in San Diego.
The technology focused investment firm is led by Andrew Albert and Jensen Bryant.
The fund will be focused on minority investments of $5 million up to $10 million in capital-efficient, B2B software companies in the U.S. and Canada.
The duo previously worked together for 8 years at TVC Capital, a nearly 20-year-old software growth equity firm.
The investors spent the first year-and-a-half investing on a deal-by-deal basis as an independent sponsor. They made several pre-fund investments, including Mappedin, Megadata, and Bucketlist, before deciding to launch Channel’s debut fund.
For Business of San Diego, I spoke with the two founding partners to learn more about their time at TVC Capital, the early days of Channel Equity Partners, and their plans for their first fund.
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TVC Capital to Channel Equity Partners
TVC Capital, which was founded in 2006, is one of the few software-focused growth equity firms in San Diego.
It invested 4 funds, reaching nearly $400 million assets under management (AUM), before beginning to quietly winding-down its operations in the summer of 2022.
Andrew and Jensen, who both worked at the firm since 2015, carefully evaluated their next career moves when the wind down became official in 2022.
Wanting to remain in San Diego and in software-focused growth equity investing, the local investors teamed up to launch their own firm that same summer.
“We chose the name Channel as an ode to the coastal Southern California region we call home,” said Andrew Albert, co-founder and managing partner at Channel.
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Strong Investing Background
Albert started his career working on Wall Street as an analyst at firms like Bear Stearns & Co. and Thomson Horstmann & Bryant, before joining Invicta Capital Management (ICM) as the third employee.
In particular, Albert helped grow Invicta’s assets from $30 million to $400 million-plus in under three years. He decided to move from New York City to San Diego and joined TVC Capital in February 2015.
“During our time at TVC, we partnered with 13 software companies across the firm’s third and fourth funds. Several of these businesses are on track to surpass $100 million in ARR this year or next,” said Albert, who led the firm’s research and sourcing efforts and sat on several portfolio company boards.
Bryant began interning at TVC in 2015 during his senior year at University of San Diego. After graduating, he received a full-time job offer with the firm, where he helped spearhead deal sourcing and execution. He also helped manage the TVC portfolio.
“I’m a So-Cal native. I was born and raised in Palm Desert before moving to San Diego for college,” said Bryant. “Many of my friends have had to move away for job opportunities; I am fortunate that I’ve been able to build a career in finance without ever leaving San Diego.”
“Now as founders ourselves, Andrew and I are consciously trying to build the team locally. We want to create more opportunities for folks that want to be here in San Diego, just like us.”
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Plans for Fund I and Beyond
The early-growth equity firm’s Fund I is primarily focused on investments in B2B software companies, but it will also consider software-enabled services businesses.
Channel seeks to back companies that typically have between $3 million and $10 million in annual recurring revenues.
“This is our sweet spot,” said Bryant. “Our target companies are not a fit for typical venture portfolios and too early for most growth equity firms. These businesses have been lightly funded, or even completely bootstrapped, and are looking for an appropriate amount of growth capital to scale.”
Channel has also co-invested alongside La Jolla-based firm Blueprint Equity, which raised its $200 million second fund in 2022. Other software investment firms in San Diego include JMI Equity, which has $8 billion-plus in assets under management.
“We have great respect for, and are very symbiotic with, JMI and other, later-stage growth firms,” said Albert. “We’ve been very vocal with LPs about keeping Channel’s funds, long-term, at sizes where we can stay in our lane and maintain that symbiosis.”
“We also can’t thank Blueprint enough for their guidance and support as we’ve been getting Channel off the ground these past two years,” said Bryant.
“Regardless of the stage of their business, we want San Diego to be recognized as a go-to market for software entrepreneurs seeking growth capital,” he added.