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Led by two healthcare vets, Questa faces tough fundraising market

The venture growth firm previously closed on $199m for its debut vehicle and $348m for its sophomore fund.

Venture growth firm Questa Capital has set out to raise $400 million for its third fund in the midst of a challenging fundraising environment.

The 6-year-old healthcare investor has come to market less than two years after closing on its sophomore vehicle. It closed on $199 million for its debut fund in 2018 and $348 million for Fund II in 2020, regulatory filings show.

“Many GPs across PE and VC invested quickly over the last couple of years and are back now much earlier than their current LPs expected,” said Kelly DePonte, managing director of Probitas Partners, a placement advisory service that has helped raise more than $100 billion for VC, PE and other funds. “I was talking to an LP this week who at the beginning of the year expected six GPs looking for reups this year and has 12.”

DePonte said he was not familiar with Questa or its strategy. Generally speaking, “the overall market has been turning from growth strategies towards value strategies with down-side protection this year – thus more interest in things like infrastructure,” he said. “On the growth side of things, more GPs are coming back without an exit but with robust unrealized returns and a promise of exits soon.

“Given the public market turmoil, certain LPs are not buying this scenario. I was talking to an LP this week who was responding to GPs taking this stand with, ‘OK, come back to me when that proposed exit materializes,’ and not minding if they lose access. There is less fear of losing out on an opportunity.”

A Questa partner did not respond to a message left by VCJ.

The firm, with offices in San Francisco and Washington, DC, was founded in 2016 by Ryan Drant, previously a general partner at venture firm New Enterprise Associates, and Bradley Sloan, previously a principal at private equity firm Parthenon Capital. Drant and Sloan are the only people listed as executive officers for the Questa Capital Partners III general partnership, according to a regulatory filing.

Fund III has not yet held a first close.

The Fire and Police Pension Association of Colorado and the University of Texas Investment Management Company were investors in Questa’s first two funds, according to PitchBook. Other Fund II investors included “endowments, foundations, family offices, consultants, pension plans and fund-of-funds,” a press release about that fund noted.

Acalyx Advisors of New York helped to market Questa’s first two funds, but it’s not clear if it has been hired to market Fund III.

“We are passionate about healthcare and our partners have been active investors in the healthcare sector since 1996,” the Questa website states. “As partners at New Enterprise Associates and Parthenon Capital, we have served on over 60 boards of directors and thus far have helped guide 34 companies to successful exits.”

The firm currently has 19 companies in its portfolio. At least one of them is a unicorn: DispatchHealth. The provider of mobile and virtual healthcare services was given a post-money valuation of $1.7 billion when it raised $200 million for a Series D round in March 2021, according to PitchBook.