Episode summary
I Raised $450M in 4 Months... Then Said No to More | Deepak Sindwani
How I Invest With David Weisburd
· · 7 min · Hosts: David Weisburd, Curtis Pierce · Guests: Deepak Sindwani
Summary
Wavecrest capped its third fund at $450 million, even after raising it in four months, because Deepak Sindwani argued that staying on strategy matters more than gathering more capital. He said the firm was intentionally built to invest in the lower middle market, with a focus on sub-$50 million equity checks, and that crossing that line would force either larger checks or a different strategy entirely. He framed the decision as a commitment to “do what you say, say what you do,” even if there was clear demand to upsize the fund.
Sindwani argued that fund size has a breakpoint in growth equity: above $50 million equity checks, the market becomes 5 to 10 times more competitive, deals become more auction-driven, and direct sourcing becomes harder. He said that if the firm wants only 10 to 12 portfolio companies, the fund naturally caps around $500 million to $600 million. Keeping the portfolio concentrated, he said, is essential to preserving the firm’s target of 3 to 4x gross fund-level returns.
He also said size brings benefits beyond capital, including a stronger brand with entrepreneurs and talent, and a larger growth operations team that can help portfolio companies with sales, marketing, pricing, and analytics. But he emphasized that the real appeal of growth equity is the middle ground between venture and buyout: companies that are growing fast, typically around 50% a year, while still being profitable.
Key takeaways
- Deepak Sindwani said Wavecrest capped Fund III at $450 million to avoid drifting out of its sub-$50 million check strategy.
- Sindwani said growth equity gets 5 to 10 times more competitive above the $50 million equity-check level.
- He said a concentrated portfolio of 10 to 12 companies naturally limits fund size to roughly $500 million to $600 million.
- Sindwani said the firm’s goal is to preserve 3 to 4x gross fund-level returns rather than chase larger management fees.
- He argued that Wavecrest’s edge is helping profitable companies that are still growing about 20% to 100% a year, with an average near 50%.
Notable quotes
“we started the firm actually having come from larger firms, bank capital and Vist equity partners intentionally to come down market”
“we need to we want to maintain that discipline, which means your fund size is limited”
“we started with a $400 million target, $450 million cap”
“above $50 million equity check the market gets somewhere between 5 and 10x more competitive”
“we're really looking for the best of both worlds”
How the episode opens
So last year you raised your third fund, $450 million and you did it in four months. Given that it was a relatively easy raise, why not raise more capital? So from our standpoint, we really believe in a consistent approach to investing and we started the firm actually having come from larger firms, bank capital and Vist equity partners intentionally to come down market.
We used to be in the mid-market. We used to invest kind of $50 to $150 million equity checks per deal. And so part of creating Wave Crest was being in the lower middle market, the sub $50 million equity check market.
And so when you think about um our overall strategy, which we'll get into, we need to we want to maintain that discipline, which means your fund size is limited. Otherwise, if you either your check size grows or you end up uh in a different strategy. So from our standpoint um obviously we're grateful for the interest from our existing investors and new investors that enabled us to get it done quickly as you mentioned but the focus and the name of the game was always stay on strategy and the reason for that is we believe that our end of the market in growth equity at least is the is kind of the sweet spot is where the the superior risk adjusted returns are.
I know you'll probably reflexively say no but wasn't there a temptation to make the fund bigger? you get essentially 20% of those management fees guaranteed. — Look, there's always a temptation and you know we'll give you the exact number but you know there was a multiple on the amount we closed of interest even towards the end even the existing investors or in the new investors who came in wanted to do more and so again grateful for that interest had the opportunity to upsize the fund.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fund size
- capital raising
- private markets
- investor competition
- fund performance
Companies and tickers mentioned
- Wavecrest
Watch the episode
Watch “I Raised $450M in 4 Months... Then Said No to More | Deepak Sindwani” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
