Super rich individuals are private equity’s growing LP base

In 2018, a Blackstone Group executive famously predicted that retail investors would make up some 50% of the firm’s assets under management in five to 10 years. Earlier this year, Blackstone said it had raised a whopping $50 billion of equity capital from that group in 2021. That’s nothing to sneeze at.

“It’s probably one of the biggest top three strategic themes in the industry,” Steffen Pauls, a former KKR managing director who led the company’s operations in Germany until 2015, tells me.

It might seem obvious to look to wealthy people for funding, but a decade ago, it wasn’t. The JOBS Act was passed by Congress in 2012 and paved the way to smaller, non-institutional investors joining the fray. Buyout firms weren’t allowed to market directly to these investors until 2013 under SEC rules. Since then, firms have been trying to wrangle their way into the multi-trillion-dollar market. They want in on it. And rich investors do too, apparently.

Pauls left KKR in 2015 and opened a tech company called Moonfare. Somewhat similar to AngelList, where individuals can invest in a startup via special purpose vehicle, venture-backed Moonfare uses feeder funds for accredited investors to invest in funds at firms like Apax Partners, Carlyle Partners, or General Atlantic—as the average millionaire isn’t going to pick up the phone, call up Apollo Global Management, and become an LP in Fund X. Moonfare, which has already been operating in Europe, opened its doors in the U.S. near the beginning of this year. Approximately 2,500 global investors had put in around $1.8 billion at the end of April. The markets might be shaky and warnings of a downturn might be flooding FinTwit, but the wealthy are still writing checks.

It is interesting how technology platforms are removing some of the intermediaries typically required to access private markets. The biggest private equity firms have traditionally relied on wealth management behemoths like Morgan Stanley or UBS (or big independent broker-dealers) to route their offerings to financial advisors who cater to the HNW crowd. As you can imagine, brokerages typically charge fees for prime shelf space, and things can get expensive.

“There are more and more people going direct,” Pauls says, noting that many “savvy” individuals want to make their own investment decisions.

But here’s the thing about going direct—you better know what you’re doing.

The name’s Dan, Dan Hannum… He said he had turned his life around after a year in a juvenile offender program, gotten an M.B.A., worked at Goldman Sachs, Morgan Stanley, and TD Ameritrade, and made millions in crypto—except that he made up most of that. Looks like Hannum fooled the crypto tax company ZenLedger (where he had joined as COO and supposedly been an investor), Forbes, and ZenLedger’s VC backers. Read more in this intriguing New York Times story. 

What’s happening? I’m writing a forthcoming essay on the state of venture capital funding. What are you seeing right now? Are startups re-opening older funding rounds? Are you re-opening funding rounds to LPs? Have you turned away from later-stage rounds? Or still pressing pause altogether? Tell me what it looks like out there.

Thanks for reading. See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Mosyle, a Winter Park, Fla.-based Apple device management and security platform provider, raised $196 million in Series B funding led by Insight Partners and was joined by investors including StepStone Group, Elephant, and Album VC. 

- Dianthus Therapeutics, a New York and Waltham, Mass.-based biotechnology company developing antibody complement therapeutics, raised $100 million in Series A funding led by 5AM Ventures, Avidity Partners, and Fidelity Management & Research Company and was joined by investors including Wedbush Healthcare Partners, Fairmount, Tellus BioVentures, and Venrock Healthcare Capital Partners. 

- Tailscale, a Toronto-based VPN services provider, raised $100 Million in Series B funding. CRV and Insight Partners led the round and were joined by investors including Accel, Heavybit, Uncork Capital, and other angels. 

- Sentry, a San Francisco-based application monitoring company, raised $90 million in Series E funding. BOND and Accel led the round and were joined by investors including New Enterprise Associates and K5 Global. 

- Tubulis, a Munich-based antibody-drug conjugate developer, raised €60 million ($63.2 million) in Series B funding led by Andera Partners and was joined by investors including Evotec, Fund+, Bayern Kapital, BioMedPartners, coparion, High-Tech Gründerfonds, OCCIDENT, and Seventure Partners. 

- Brimstone, an Oakland-based carbon-negative cement developer, raised $55 million in Series A funding. Breakthrough Energy Ventures and DCVC co-led the round and were joined by investors including Collaborative Fund, AccelR8, Amazon’s Climate Pledge Fund, Fifth Wall Climate Tech, Impact Science Ventures, S2G Ventures, Gatemore Capital Management, Osage University Partners, and SystemIQ.

- LottieFiles, a San Francisco-based motion graphics platform for designers and developers, raised $37 million in Series B funding led by Square Peg Capital and was joined by investors including XYZ Venture Capital, GreatPoint Ventures, 500 Startups, and M12. 

- RobinFood, a Bogotá-based cloud-based restaurant company in Latin America, raised $32 million in funding led by Blue Like an Orange Sustainable Capital, Palm Drive Capital, and Minerva Capital.

- Lumos, a San Francisco-based SaaS management and identity governance software company, raised more than $30 million in funding from Andreesen Horowitz, Neo, Lachy Groom, Google Cloud CISO Phil Venables, OpenAI CTO Greg Brockman, and others. 

- Valence, a New York-based teamwork platform, raised $25 million in Series A funding led by Insight Partners and was joined by others.

- Sleuth, a San Francisco-based engineering efficiency platform, raised $22 million in Series A funding led by Felicis and was joined by investors including Menlo Venture and CRV. 

- Kintent, a remote-based compliance platform, raised $18 million in Series A funding led by OpenView and was joined by Tola Capital. 

- Allocate, a San Francisco-based digital investment platform for investors to access venture funds and co-investments, raised $15.3 million Series A funding led by M13 and was joined by investors including Bedrock, SignalFire, Intera Capital, Tusk Venture Partners, Urban Innovation Fund, Fika Ventures, Anthemis, Basis Set Ventures, and Broadhaven Ventures. 

- Sensible Weather, a Santa Monica, Calif.-based climate risk technology company, raised $12 million in Series A funding led by Infinity Ventures and was joined by investors including Certares Ventures, Wonder Ventures, Group1001, and other angels. 

- Ava, a San Francisco-based A.I.-based live caption company for the deaf and hard-of-hearing, raised $10 million in Series A funding led by Khosla Ventures and was joined by investors including Initialized Capital, Lerer Hippeau Ventures, LeFonds VC, Ring Capital, and Sorenson’s Enable Ventures. 

- Henry, a Buenos Aires-based technical education company for Latin America, raised $10 million in funding co-led by Cathay Innovation, Seeya Ventures, and Kayyak Ventures and was joined by investors including Accion Venture Lab, Tim Draper, DILA Capital, and other angels.

- Galileo, a San Francisco-based data intelligence tool developer for machine learning technologies, raised $5.1 million in seed funding led by The Factory and was joined by angel investors including Kaggle co-founder and CEO Anthony Goldbloom and others.

-  BarRaiser, a Wilmington, Del.-based interviewing platform, raised $4.2 million in seed funding led by 021 Capital and Global Founders Capital and was joined by other angels.  

- Scoot Science, a Santa Cruz, Calif.-based ocean analytics company, raised $4.1 million round in seed funding led by Third Kind Venture Capital and was joined by investors including Rackhouse, Climate Capital, My Climate Journey, Hawktail, Liquid 2 Ventures, Impact Assets, Box Group, and other angels.

- Tengiva, a Montreal-based digital supply chain platform for the textile industry, raised CAD $4.95 million ($3.86 million) in seed funding led by Fonds Ecofuel and was joined by investors including Inovia, Anges Québec, Active Impact Investments, and N49P. 

- Fundid, a Missoula, Mont.-based business finance growth platform, raised $3.25 million in seed funding led by Nevcaut Ventures and was joined by investors including The Artemis Fund, Builders and Backers, and others. 

- Fohlio, a New York-based data management software company, raised $3.15 million in Seed funding led by Brick & Mortar Ventures and was joined by investors including Ocean Azul, Dreamit Ventures, and GZ Real Estate. 

PRIVATE EQUITY

- AEMCO, a One Equity Partners portfolio company, acquired F&M MAFCO, a Greenville, S.C.-based international supplier of tools and equipment rental, sales and service programs. Financial terms were not disclosed.

- Bonaccord Capital Partners acquired a minority stake in Penfund, a Toronto-based junior capital provider to mid-market companies. Financial terms were not disclosed. 

- Godspeed Capital acquired Rachlin Partners, a Culver City, Calif.-based architecture, planning, program management, and construction management company focused on education and government facilities in California. Financial terms were not disclosed.

- Lonsdale Capital Partners acquired Todays Dental Group Limited, a London-based dental platform. Financial terms were not disclosed. 

- Mercer Global Advisors, backed by Oak Hill Capital and Genstar Capital, acquired Sanford Advisory Services, a Portage, Mich.-based wealth management firm. Financial terms were not disclosed.

- Physical Rehabilitation Network, backed by Gryphon Investors, acquired Kinetix Advanced Physical Therapy, a Lancaster and Valencia, Calif.-based physical therapy practice. Financial terms were not disclosed.

- The Chartis Group, backed by Audax Private Equity, acquired Health Collective, an Atlanta-based healthcare consulting and health equity platform. Financial terms were not disclosed.

- The Cook & Boardman Group, backed by Littlejohn & Co., acquired Electronic Systems Group, a Cranberry, Pa.-based security and systems integrator. Financial terms were not disclosed. 

OTHER

- ActiveCampaign acquired Postmark, a Philadelphia-based transactional email provider. Financial terms were not disclosed.

- Epicore Biosystems acquired the assets and intellectual property of Eccrine Systems, a Cincinnati-based wearable sensor company. Financial terms were not disclosed. 

- OurFamilyWizard acquired Cozi, a Seattle-based family organizing app. Financial terms were not disclosed. 

- SoundCloud acquired Musiio, a Singapore-based artificial intelligence company for the music industry. Financial terms were not disclosed.

- Visier acquired the assets of Yva.ai, a Santa Clara, Calif.-based collaboration analytics vendor. Financial terms were not disclosed.  

IPOS 

- Envirotech Vehicles, a Osceola, Ark.-based electric vehicles provider, filed for an IPO. The company posted $2 million in sales in 2021 and reported a net loss of $7.7 million.

FUNDS + FUNDS OF FUNDS

- Capital Dynamics, a Zug, Switzerland-based asset management firm, raised €300 million ($315.9 million) for a fund focused on private equity managers across Europe, North America, and Asia.

- Afore Capital, a San Francisco-based venture capital firm, raised $150 million for a fund focused on pre-seed stage investments.