Stage wants to catch the Series B knife

Axios / March 25, 2022 /  Denver-based private equity firm Stage Fund is raising $50 million for its second fund to buy startups that are struggling to raise their Series B rounds.

Targeted industries include e-commerce and consumer packaged goods.

Why it matters: About half of the companies that raise Series A never go on to raise another round, but between 20% and 30% are still good businesses, according to Stage general partner Krista Morgan.

Between the lines: Most founders are conditioned to think they need to solve everything with money, she said.

stage_kristaMorgan
  • Stage’s approach is to provide some money and clean up the cap table, giving startups more time to find their footing.
  • It also can provide founders with a meaningful exit, even if not the one originally envisioned.

Example: ThirdChannel, which provides contract labor for retail stores, saw its revenue plummet at the outset of the pandemic and needed to raise more money.

  • Stage saw promise in the fledgling business and restructured it, providing finance, fundraising, and back-office capabilities so Third Channel could focus on selling its services.
  • Stage now is seeking to sell ThirdChannel, which it says is profitable and growing 100% year over year.

 

The bottom line: There are good companies that won’t achieve the exponential growth required by many VC models.

But they can be transformed into profitable businesses that are attractive to strategic acquirers, Morgan argues.

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