By guest authors Irina Patterson and Candice Arnold
This is the thirteenth interview in our series on financing for entrepreneurs. I am talking to Alan Rossiter, vice chairman of Springboard Capital, an early-stage private equity fund in Jacksonville, Florida.
Irina: Hi, Alan. Could you please start with your own background?
Alan: In the recent past, I’ve been a private angel investor. Going back before that, I was a career naval officer, a Navy pilot for a number of years, and then I retired in the early 1990s.
I did angel investing, got involved very heavily in some entrepreneurial initiatives – incubator-style initiatives – within our area. I’m located in Jacksonville. From that, almost immediately, as soon as one gets into the business of helping entrepreneurs, you immediately get into the business of capital and trying to facilitate private equity investment – primarily from angels – of course, in early-stage and startup companies. I did that primarily from about 1996 to about 2000. I did a number of deals during that time.
In 2000, I got together with about eight or ten key angels – at that time I had a network of about 270 high net worth individuals in this region – and we started to look for a better way to do this than just one-off deals.
And, at that time, we conceived of and created Springboard Capital – actually that was Springboard Capital One, our first fund – in 2001. We invested that out to the end of 2005. In 2006, we formed Springboard Capital Two, and we’re still investing from that. We’ll probably do one additional investment and we’re in the design work right now for a follow-on fund.
That’s a quick overview of who we are and what we’re doing.
Irina: Could you tell us about the structure of your fund? How does it work?
Alan: There are a couple of aspects to it. One, it is structured as an LLC. The first fund had 37 members in the LLC. All invested into that fund. The second fund is structured identically as an LLC. There are 53 partners in that. Again, they’re all financially invested into the fund.
Two other aspects of the fund: One is we have a provision in there that we call “add-on,” which means that when the fund makes a determination, through our governance process, that we’re going to make an investment, the fund will commit capital. That means that everybody who’s invested in the fund is going to be invested in that company.
Before we go to closing, we go back around our entire membership to solicit anybody who has an interest in adding additional funds, which we call “add-ons,” to that investment. Those add-on investments are managed through Springboard. They’re not side-by-side investments. In other words, they’re still coming through Springboard; we manage those as separate capital accounts. Traditionally, our add-ons have been about 120% of what the base has been.
One other aspect of the fund – I serve in two roles. My company, which is Springboard Capital Management, LLC, serves as the administrator or manager of the fund. I manage all the back-office operations, deal flow, meeting organization, closings, accounting, all manner of activities on contract to the Springboard Fund. So I have two hats because I’m also an investor in the fund.
That’s the structure we put together in 2001 when we launched Springboard One and we’ve held to that very closely with very few changes all the way until today.