COLUMBUS, Ohio (COLUMBUS BUSINESS FIRST)–Two firms that specialize in loans for subscription software startups – with past borrowers including CoverMyMeds and Updox – have merged and raised a new, $128 million fund.

Columbus-based Dreadnought Capital merged last year into Seattle’s SaaS Capital under the SaaS name, the firm said Thursday in announcing the fund. Co-managing directors Rob Belcher, from SaaS, and Dreadnought founder Steve Jaffee, also named two new managing directors.

Three startups already have signed term sheets and are working toward closing their loans, said Stephanie Fortener, who joined Jan. 1 from Columbus.

“We have a great pipeline,” Fortener said. “It’s really enabling founders to grow their business with non-dilutive capital. … It’s a great stepping stone to really successful outcomes.”

Fortener had been a partner at Dreadnought since 2019. At year’s end, she stepped down from her dual role as vice president of Crane Investment Co., the private equity and investing arm of Columbus-based Crane Group where she worked 14 years. Crane is a limited partner in this and the previous three Dreadnought funds.

In Seattle, Randall Lucas also joined as managing director. Jaffee, formerly of Columbus, has moved to the Denver region, but the firm is operating virtually. The CFO is in Cincinnati and the marketing chief is in Dayton.

A Columbus native, Fortener said her location is advantageous for working with startups on the East Coast and in the UK.

The fund surpassed its $125 million “hard cap” with enthusiastic return investors, and two from past portfolio companies that were acquired. It exceeds the combined separate funds that each had contemplated before joining forces.

“We kept virtually all our investors, and almost to a person they increased,” Jaffee said in an interview. “It’s a snowball effect.”

SaaS lends $2 million to $20 million, exclusively to private business-to-business software-as-a-service companies reaching the growth stage. It’s an alternative to giving up equity to venture capital. Along with steady interest, the firm gets a “kicker” payment if a portfolio company goes public or is acquired, Jaffee said.

“The stage of growth from $1 million to $20 million in annual recurring revenue is incredibly value-creating for founders and shareholders of SaaS companies,” Belcher said in a news release. “With this new, larger fund, we are poised to support even more companies accelerate growth in an equity-efficient manner.”

SaaS had closed loans to CoverMyMeds, later acquired for $1.44 billion, and Dublin’s Updox LLC, acquired for $143 million in 2020. Both are Central Ohio bootstrapping success stories, having grown largely through revenue with little outside equity.

Dreadnought’s Central Ohio loans included Oris Intel LLC, another bootstrapped success acquired for an undisclosed amount in 2019.

Facilities Management eXpress LLC, or FMX, still growing in Grandview Heights, has had loans from both.

Jaffee launched Dreadnought in 2016 with a $6 million fund, switching from traditional VC. He was formerly a partner with Columbus-based Reservoir Venture Partners. The firm’s three funds totaled $31 million.

Crane invested in all three, anchoring the third, Fortener said. That’s when she started the dual role as Dreadnought partner. She liked the focus on one industry and direct work with founders, in contrast to Crane’s broader and often arm’s length investments in stocks, private equity, real estate and some lending.

Fortener also is on the board of Rev1 Ventures, another source of deal flow, she said. She’s president at Columbus Humane and on the board of the Columbus Zoo and Aquarium.

SaaS Capital was an investor in Dreadnought and a frequent handoff partner, making larger loans to later-stage companies. Its founder retired last year, and Jaffee said he sees Fortener as his natural successor.

“She’s done a great job, and borrowers love her,” he said.

Fortener’s father, Randy Fortener, was the previous president of Crane Investment; now he’s CEO of Columbus private equity firm Cozzins Road Capital.

Stephanie Fortener said her 14 years with Crane were “transformative.”

“It is truly a family in all senses possible,” she said. “But for this opportunity I never would have left.”

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