Sundance Growth Raises a Quick $125 Million for Debut Fund
Early support from investor Accolade Partners helped swiftly drive the private-equity firm’s debut software investment fund to its upper limit
Sundance Growth, a software-focused investment firm founded by former Accel-KKR dealmaker Christian Stewart, has hit a $125 million upper limit for its debut fund in one of the more difficult private-equity fundraising markets in recent memory.
“We lucked out in having a strategy and a background that appeals to a lot of [investors],” said Stewart, who founded Sundance after around eight years on the growth-investment team at software-focused firm Accel-KKR.
The Fund
Sundance Growth Fund I reached a final closing in well under six months and benefited earlier this year from support by Accolade Partners, a fund-of-funds manager that also was an early investor in Accel-KKR’s funds. Accolade, which invests in first- and second-time funds of venture and growth firms, was won over by the combination of Stewart’s hustle and the track record he built at Accel-KKR, according to Atul Rustgi, a managing partner at Accolade.
“They are arguably one of the best—if not the best—firms in software private equity,” Rustgi said of Menlo Park, Calif.-based Accel-KKR. “They‘re a great training ground.”
Washington-based Accolade’s commitment as well as work by placement agent Pacenote Capital helped Sundance quickly garner additional investor capital, pushing its fund past a $100 million target, according to Stewart. In addition to Accolade, the debut fund has attracted capital from eight other institutional investors, including endowments, foundations and a firm that operates as an outsourced chief investment office, he added.
Stewart has recruited Sean Cooley, formerly with Kayne Anderson Capital Advisors, as a vice president at Sundance and Trey Jackson, a recent graduate of Brigham Young University, as an analyst. He said the firm also plans to add an experienced associate as well as an operating executive.
The Strategy
Sundance targets investments in growing business-to-business software companies with $3 million to $10 million in annual recurring revenue.
“Those companies really don’t have a home today,” Stewart said. “They’re not venture. They’re not traditional growth, because they’re not growing fast enough, and they’re not private equity, because private-equity firms don’t want to take on the [cash] burn.”
Sundance typically makes minority investments, but over time can expand its stakes in certain companies it backs to majority positions, Stewart said. It aims to help the companies it backs grow to a point where they become attractive takeover targets for strategic buyers or other private-equity firms at higher valuations than they would currently attract, he added.
The firm plans to invest in about six companies and is far along in the process with two potential deals, Stewart said.
The strategy resonated with investors beyond Accolade, said Sam Cannon, managing partner at Pacenote Capital, which worked with Sundance to find investors for the fund.
“Christian’s discipline around fund size and desire for a concentrated portfolio is a breath of fresh air for [investors] who too often see [firms] maximizing fund size and thus being forced to do either larger deals or more deals, or worse yet, both,” Cannon said.
The Context
Sundance Growth raised its debut fund at a particularly challenging moment for first-time fund managers, as more cash-strapped investors concentrate their commitments with established firms.
Last year, U.S. firms closed at least 46 first-time private-equity, growth investment and turnaround funds, raising $9.2 billion—but that was down from 121 such funds that closed on $21.5 billion in 2023, WSJ Pro Private Equity reported earlier this year, citing data from research-provider PitchBook Data.
However, Rustgi said investors like Accolade favor first and second funds as they often generate strong returns.
“Our entry point is usually a fund one or fund two,” he said. “They’re hustling harder and they’ve got a chip on their shoulder to make sure every deal is perfect.”