San Antonio technology investment firm Scaleworks announced Tuesday that the company has raised its first venture finance fund to provide loans to growing software technology companies and Scaleworks’ current portfolio of companies.

“Software companies have almost exclusively been financed with equity in the past. But today’s software companies are much more recurring in nature and often have very stable cash flow characteristics,” stated Karl Pichler, former senior vice president and chief financial officer at Rackspace whom Scaleworks has hired to manage the new $10 million fund.

Karl Pichler of Scaleworks

“Many funding needs are temporary in nature, such as big sales and marketing initiatives, temporary development efforts, maybe an acquisition [which] can and probably should be financed with debt rather than equity. But the access to debt capital is limited or difficult for smaller SaaS [software as a service] players. This is the void we want to fill.”

Scaleworks described ideal candidates for the venture finance fund as being SaaS companies with a growing and highly recurring book of business, happy and paying customers, and high gross margins.

Founded in 2016 by Lew Moorman, former president of Rackspace, and entrepreneur Ed Byrne, Scaleworks acquires companies through venture equity, what they describe as a cross between venture capital and private equity.
The Scaleworks portfolio includes Earth Class Mail, Assembla, Filestack, Qualaroo, Followup, Mailgun, Chargify, and its most recent, Keen IO.

“With our first fund deployed, we looked for other common-sense investment opportunities for companies with great products,” Moorman said in a statement released Tuesday. “Our mission is to turn great products into great businesses, and we think that the new venture finance fund is yet another path for hard-working founders.”

Scaleworks moved last September into the renovated, three-story Savoy building, located at Houston and Soledad streets, in the heart of San Antonio’s growing tech corridor.

 

Shari Biediger

Shari Biediger

Shari Biediger is the business beat reporter at the San Antonio Report.