1st October 2026
This year marks a decade of FPE operating as a standalone firm. FPE Managing Partner and co-founder Henry Sallitt looks back at how the business got started, the moment four years in when he thought everything would be lost, and what the next decade holds for middle-market software businesses and their investors.
What did you notice that made you think FPE was worth starting in 2016?
The gap became obvious through my own experience of entrepreneurship. After working as a venture investor, I co-founded a financial services software business and ran it for close to ten years before selling it. There wasn’t much support for small software companies like ours, especially as they moved from being driven by a founder's energy and instinct, to being run on systems and processes.
There’s a common breaking point for technology businesses. Most of the roughly 15,000 new ones registered every quarter fail eventually. The ones that survive reach a first plateau of success, maybe £10 million in revenue and £1-2 million of EBITDA, built almost entirely on the hard work of a handful of people who hold the equity. In 2016, no investor specialised in helping them past that point.
At the time, we were a small team within what was then the Fleming family office. Dan Walker and Llewellyn John, who were part of that team, remain partners at FPE today. Our mandate was broad, but we wanted to focus on growth, and by around 2012, we had narrowed that down to software and a stage of a company’s development that we called second-stage growth.
You’ve said raising your first fund was the hardest thing you’ve ever done. What happened?
The family office didn’t provide sufficient committed capital for us to build a business, and the majority of the other clients within their business wanted discretion over individual deals, and institutions at the time weren’t keen on backing a captive manager sharing economics with a larger organisation. That meant if we wanted to raise institutional money, we had to spin out and go it alone.
The problem was none of us had relationships with institutional investors, or had even worked in mainstream private equity, so it took about 18 months to convince people we could make money. We closed the first £50 million in our first institutional fund in 2016, just enough capital to prove out the thesis we’d built the firm around.
But just three months later, the UK voted for Brexit and most European institutions paused their UK investment programs. Private equity is a long-term asset class; it’s illiquid for 10 or so years, so the easiest thing for any investor to do when something big happens is to delay a decision. We continued to fund-raise and closed the fund at £100m some 12 months later.
What got us through was that the underlying opportunity never really went away. Whatever the macro is doing, founders everywhere still hit that same plateau and need the same kind of help to get through it, so the work in front of us didn’t change even if the fundraising environment did.
On top of that, founders want options. Relatively few founders want to stay with their businesses forever. Jeff Bezos and Elon Musk are rare. We find that at a certain stage, most founders want to change their relationship with their business, either for lifestyle reasons or because they don’t enjoy managing a larger organisation. We specialise in supporting those founders and businesses through the transition into a larger and more predictable business.
That wasn’t even the biggest macro challenge FPE has faced. Why was Covid worse?
It was the moment we thought we were about to lose everything we had built. We had deployed around half the fund by then and hadn’t delivered a single exit, so there was nothing to fall back on.
There was a period in which pretty much everyone thought their business was going to go under. We rewrote all of our portfolio companies’ business plans, drew down every banking facility and, where appropriate, used the government schemes to maintain liquidity and furloughed staff where necessary.
It soon became clear that this was a catalyst to accelerate a number of trends that were emerging in the software industry - working from home, distributed development teams, and an acceleration in the adoption of Saas models, all of which were positive for smaller software businesses. We exited our first four investments at the end of 2020 and start of 2021, returning all the capital in that fund, with a further seven still under our control, but more importantly validated our strategy of buying good businesses, investing in people, product and processes, and selling at a premium once they were able to achieve predictable, consistent growth at scale.
You mentioned second-stage growth earlier. How does that strategy work?
It comes down to how the market prices these businesses. As a business grows, maintaining the same 20-30% growth rate again at scale is much harder - it’s just maths. Most investors will only pay full price for a business that’s growing fast and comfortably clearing the rule of 40, the benchmark where growth and profit together add up to at least 40%.
We seek businesses operating in dynamic markets that have a great offering, but growth has either slowed, or the founder is concerned about the ability of the business to continue to grow at the same rate in the future. This is usually because growth to date has been delivered through drive and determination of the founders, and change is required to deliver that same performance at scale.
We’re not put off when growth starts to slow, as long as we can build conviction in the market and the product’s opportunity to capture share, because we back ourselves to help fix the operational challenges that are holding the business back.
In practice, that means two distinct phases. A Foundation phase, during which we re-underwrite the product-market fit, defining the ideal customer profile, typically to target a much more focused market opportunity and invest in the systems and management capability required to deliver this change. Only once that foundation is right do we transition into an Acceleration phase, ramping up a much more focused sales and marketing push and investing in the operational capability to fulfil increased demand.
What do the next ten years look like for FPE?
We see enormous opportunity to continue to deliver outsized returns investing in software, data, and services businesses at the smaller end of the market. There is a huge pool of opportunity and a paucity of specialist investors with the experience to help businesses make this second phase transition.
The biggest change ahead is AI, but it’s also one we’ve had a head start on. Specialist software investors like us have been thinking hard about it for two or three years, while most of the market only had its moment of realisation in Q1 of this year.
We think we’re on the right side of that transition. Small companies are nimble and can change quickly, and a lot of the advantage from AI is going to flow to businesses that are already helping industries function through their customer relationships, workflows, data, network effects, and integrations. These businesses are well placed to harness AI; they can adapt fast and become more efficient and use it to give customers more functionality and better insight into their own operations.
It’d be bold to say exactly what the software industry might look like in ten years, but whatever shape it takes, there will still be a large number of optimistic young companies emerging that need specialist help as they make the transition into being businesses that can deliver consistent growth at scale.
We will build on our specialism, and the next ten years will be about continuing to push ourselves alongside great entrepreneurs and continuing to build a team and culture that can deliver excellence.
We’ve built the whole team from the ground up and have never made a lateral hire. We share success and lean into difficult situations together. Ben Cole and Chris Kay, our two newest partners, have both built their entire private equity careers at FPE, and we plan to continue to grow organically. We have a very strong culture and super talented team that will deliver success however the next ten years unfold.