Blackstone has raised an initial $3B for its second growth fund as tech stocks continue to plunge
We may be winding our way towards a recession, but limited partners are still convinced of the opportunity in late-stage startups—at least if you take a look where their money is going.
Private equity giant Blackstone has been fundraising for its second growth fund this year. The investment firm has raised an initial $3 billion in funding, entirely from institutional investors, for the first close of its new fund, according to a person familiar with the matter, who spoke with me on condition of anonymity. This first round of fundraising, which is expected to close later this week, according to the person, puts Blackstone well on track to hit its $7-8 billion target for the fund. A Blackstone spokesperson declined to comment.
Investment firms like Fidelity or T. Rowe Price have taken a step back from late-stage deals, but other investors aren’t slowing down and are fundraising billions of new capital to deploy into the private markets as valuations fall and many startups effectively go on sale. As I reported last month, Tiger Global Management’s private investing arm is planning to raise a new fund this year, too—a follow-on to the behemoth $12.7 billion fund it closed earlier this year.
While it may be a longtime veteran in the private markets, Blackstone is relatively new to growth equity investing. The company started investing out of its inaugural growth fund in 2020—during what was a soaring period for venture capital. Blackstone’s first close for that fund was around $1 billion, the person told me. By March 2021, Blackstone Growth, which is helmed by General Atlantic veteran Jon Korngold, had raised a titanic $4.5 billion from both institutional and high net worth investors. Approximately 90% of that capital has since been deployed, according to the person.
Initial indications of Blackstone Growth’s (or BXG as it is known) performance can be seen in Blackstone’s 2021 third quarter earnings, in which the fund reported total net IRR of 90%. That figure fell to 43% in the fourth quarter, according to earnings statements. By the end of the first quarter of 2022, as the Nasdaq has plunged, returns for BXG had fallen to 17%. Of course, tech stocks are down across the board. It’s also rather hard to evaluate a venture fund on the basis of its first couple years on the market, no less its first three reporting quarters. VC funds deploy capital over several years and operate under a long-term investing horizon, so it can take many years to gauge the success of a first fund. But some of BXG’s initial bets, like Bumble and Oatly, which both went public last year, are trading well below their debut price. Bumble shares were trading 25% below the initial IPO price at market close yesterday, while Oatly shares are down more than 83%. Many of Blackstone’s other growth equity bets have yet to pan out, some of its notable investments being Mollie, Spanx, and ISN. The Blackstone spokesperson said the company couldn’t comment on BXG’s performance due to fundraising restrictions.
Plenty of investors see the current downturn as an opportunity, as equity is getting cheaper. After all, there’s more room for upside. But whatever way you look at it, it doesn’t mean it’s an easy market to navigate: Rising interest rates, high inflation, and soaring gas prices make it harder for many companies to generate revenue and, for many, more expensive to operate—meaning there’s a higher chance they’ll fail. Layoffs and restructuring events have become commonplace over the last month across sectors, and many funds are putting more emphasis on due diligence and a longer runway.
But Blackstone seems ready for an influx of new dry powder, as underlined by the aforementioned $7-8 billion it is seeking for the second iteration of its strategy, according to disclosures from one of its LPs that were first reported by Buyouts Insider.
Is now the time to do it? Blackstone’s investors seem to think so.
Changing the world… As you may know, Fortune publishes an annual list of companies that are doing well by doing good. They’re using the creative tools of business to help the planet and tackle society’s unmet needs—and they’re earning a profit while doing so (you can see last year’s honorees here). As investors, I assume you have a good idea of some of the companies who are doing just that. If you’d like to nominate a company for this year’s list, please do so using this form. The deadline for applications this year is Friday, July 29. Please direct all questions about the list to Matt Heimer and Erika Fry at firstname.lastname@example.org.
See you tomorrow,
Jackson Fordyce curated the deals section of today’s newsletter.
- Intersect Power, a Beaverton, Ore.-based solar energy project developer, raised $750 million in funding. TPG Rise Climate led the round and was joined by investors including Climate Adaptive Infrastructure and Trilantic Energy Partners North America.
- DataArt, a New York-based software engineering firm, raised $75 million in funding from FTV Capital.
- Front, a San Francisco-based customer communication platform, raised $65 million in Series D funding. Salesforce Ventures and Battery Ventures led the round and were joined by investors including PagerDuty CEO Jennifer Tejada, Sequoia Capital, Threshold Ventures, and Uncork Capital.
- PicnicHealth, a San Francisco-based health technology company, raised $60 million in Series C funding. B Capital Group led the round and was joined by investors including Felicis Ventures and Amplify Partners.
- Kaiko, a Paris-based cryptocurrency market data provider, raised $53 million in Series B funding. Eight Roads led the round and was joined by investors including Revaia, Alven, Point9, Anthemis, and Underscore.
- Lightbits, a San Jose-based software storage data platform, raised $42 million in funding. Atreides Management led the round and was joined by investors including J.P. Morgan, Valor Equity Partners, O.G. Tech, Pacific Century Group founder and chairman Richard Li, and others.
- Birdie, a London-based home health care tech platform, raised $30 million in Series B funding. Sofina led the round and was joined by investors including OMERS Ventures and Index Ventures.
- Nautical Commerce, a New York-based multi-vendor platform for marketplaces, raised $30 million in Series A funding. Drive Capital led the round and was joined by investors including Accomplice Ventures and Golden Ventures.
- Normalyze, a San Francisco-based cloud security platform, raised $22.2 million in Series A funding co-led by Battery Ventures and Lightspeed Venture Partners.
- Opaque Systems, a San Francisco-based analytics and A.I. platform for confidential computing, raised $22 million in Series A funding. Walden Catalyst Ventures led the round and was joined by investors including Storm Ventures, Thomvest Ventures, Intel Capital, Race Capital, The House Fund, and FactoryHQ.
- Workvivo, a Cork, Ireland and Boston-based employee experience app, raised $22 million in Series B funding from Tiger Global.
- Konnecto, a Tel Aviv-based prescriptive marketing platform, raised $21 million in Series A funding. PeakSpan Capital led the round and was joined by investors including TPY Capital, Mindset Ventures, Differential Ventures, SeedIL Ventures, and Magna Capital Partners.
- Cordio Medical, an Or Yehuda, Israel-based medical speech processing platform, raised $18 million in funding. Ceros Financial Services and Peregrine Ventures invested in the round.
- Ria Health, a San Francisco-based telehealth provider for alcohol use disorder treatment, raised $18 million in Series A funding. SV Health Investors led the round and was joined by investors including SV limited partner, BPEA Private Equity, and SOSV.
- Zigazoo, a Miami-based social network and NFT education platform for kids, raised $17 million in Series A funding. Liberty City Ventures led the round and was joined by investors including Causeway, The NBA, Dapper Labs, OneFootball, Medici VC, Animoca Brands, Lightspeed Venture Partners, Core Ventures, Spartan Group, and TikTok celebrities Charli and Dixie D’Amelio.
- Onda, a remote-based tequila seltzer brand, raised $12.5 million in funding. Aria Growth Partners led the round and was joined by beverage industry professional Clayton Christopher, 25madison, and other angels.
- Audience, a Miami-based outbound marketing platform, raised $10 million in Series A funding led by Next Coast Ventures.
- Bykea, a Karachi, Pakistan-based, bike-riding on-demand delivery platform, raised $10 million in funding. Prosus Ventures, MEVP, Sarmayacar, Tharros, and Ithaca Capital invested in the round.
- Dynamic, a remote-based multi-chain, wallet-based authentication and authorization platform, raised $7.5 million in seed funding. A16z crypto led the round and was joined by investors including Castle Island Ventures, First Round Capital, Solana Ventures, Chapter One, Circle Ventures, Hypersphere, Breyer Capital, at.inc/, Sheva, Shine Capital, and others.
- Hank, a New York-based community building platform for older adults, raised $7 million in seed funding co-led by General Catalyst and Resolute Ventures.
- Screenloop, a London-based hiring intelligence platform, raised $7 million in seed funding. Stride VC led the round and was joined by investors including Ludlow Ventures, All Iron Ventures, Passion Capital, and Indeed founder Paul Forster.
- Heyday, a San Francisco-based research assistant, raised $6.5 million in seed funding. Spark Capital led the round and was joined by investors including Abstract Ventures, Not Boring Syndicate, Firsthand Ventures, Correlation Ventures, Ride Ventures, Spacecadet Ventures, and other angels.
- BIT ODD, a Helsinki-based gaming company, raised €5 million ($5.26 million) in funding. Index Ventures led the round and was joined by investors including Eric Seufert, via his Heracles Capital fund, and angel investor Stephane Kurgan.
- Alkegen, a Clearlake Capital portfolio company, acquired a majority stake in Luyang Energy Savings Material, a Yuquan, China-based high temperature insulating materials producer. Financial terms were not disclosed.
- Alpine Investors acquired Hotel Effectiveness, an Alpharetta, Ga.-based SaaS hotel labor management solution. Financial terms were not disclosed.
- Ara Partners acquired Petainer, a London-based beverage packaging solutions provider. Financial terms were not disclosed.
- Kanbrick acquired Marine Concepts, a Lake of the Ozarks, Mo.-based custom boat cover systems provider. Financial terms were not disclosed.
- Kensing, a portfolio company of One Rock Capital Partners, acquired Vitae Naturals, a Talavera de la Reina, Spain-based vitamin E sourcer and producer. Financial terms were not disclosed.
- Smart Care, backed by Wind Point, acquired Dutton Food Equipment Repair, a Richmond, Va.-based restaurant equipment repair and services provider. Financial terms were not disclosed.
- SSE and Equinor agreed to acquire Triton Power, an East Yorkshire, U.K.-based power generating company, for $418.65 million.
- Citi Spread Products Investment Technologies acquired a minority stake in Claira, a New York-based document intelligence fintech. Financial terms were not disclosed.
- ServiceTitan acquired Schedule Engine, a Chicago-based online booking for home services provider. Financial terms were not disclosed.
- Siemens AG acquired a minority stake in Electrify America, a Reston, Va.-based electric car charging company, from Volkswagen. Financial terms were not disclosed.
- SMBC agreed to acquire a minority stake in Marathon Capital, a Chicago-based investment banking firm. Financial terms were not disclosed.
- JetSynthesys, a Mumbai-based digital entertainment and technology company, is in talks to go public via a merger with BurTech Acquisition Corp., a SPAC, according to Bloomberg. A deal is valued at more than $700 million.
FUNDS + FUNDS OF FUNDS
- Enlightenment Capital, a Chevy Chase, Md.-based investment firm, raised $540 million for a fourth fund focused on companies in the middle market aerospace, defense, government, and technology sectors.
- Rotunda Capital Partners, a Bethesda, Md.-based private equity firm, raised $405 million for a fund focused on transforming industrial firms into data-driven companies.
- Conversion Capital, a New York-based venture capital firm, raised $122 million for a fund focused on pre-seed to Series A software, cloud infrastructure, and data fintech companies.
- MassMutual Ventures, a Boston-based venture capital firm, raised $100 million for a fund focused on early and growth-stage companies in the financial technology, cybersecurity, enterprise SaaS, and digital health sectors.
- Luminate Capital, a San Francisco-based private equity firm, hired Lucy Li as managing director, portfolio finance. Formerly, she was with Meta.
- Newark Venture Partners, a Newark, N.J.-based B2B software investment fund, hired Kiswana Browne as senior associate, Chika Ogele as an associate, and promoted Sean Simons to associate. Formerly, Browne was with Plug and Play Ventures and Ogele was with Eight Sleep.