In private equity, timing is everything. Nowhere is that more obvious than in the closing of TPG’s latest technology growth fund that seeks to invest in companies that may choose to stay private longer.
TPG Tech Adjacencies II, or TTAD II, raised $3.4 billion, above its $2.5 billion to $3 billion target, according to a statement. This is also more than double the roughly $1.6 billion collected by the TTAD’s debut pool in May 2019. TTAD II will provide minority growth investments to companies across the technology sector including software & enterprise technology as well as internet, digital media and communications. Nehal Raj and David Trujillo, TPG partners, are co-managing partners of TTAD.
TPG, the global asset manager with $135 billion in assets, didn’t disclose who invested in TTAD II. LPs of the fund include state and local pension funds, sovereign wealth funds around the world, as well as high-net-worth individuals.
“We’re grateful for the strong support from our new and existing investors, who have shown their trust in the impact and success of our strategy, as well as our broader tech franchise,” said Trujillo, who heads TPG’s internet, digital media, and communications investing efforts, in the statement.
TTAD II is primed to benefit from the current broad market downturn, which caused the number of IPOs to slow significantly in 2022. Just 87 companies went public last year, down from about 400 in 2021, according to Dealogic. This year, 44 companies have listed their shares using a traditional IPO, up from 31 in 2022. Venture fundraising has dropped dramatically this year. Global funding hit $76 billion in the first quarter, down 53% from $162 billion for the same quarter in 2022, according to Crunchbase.
Tech valuations have also dropped across all sectors. For example, Stripe was valued at $50 billion in March, down from the $95 billion valuation the company received in 2021.
“For companies that don’t want to do an IPO, or can’t, and don’t want to test fundraising valuations in this environment, we can do something,” Trujillo said. “We bring the flexibility to help high-quality companies continue to grow.”
The fund will provide structured minority investments—such as senior debt or common equity—to tech companies dealing with the scarcity of capital, said Raj, who co-leads TPG’s investments in software and enterprise technology across its private equity platforms. The fund seeks to invest a minimum of $100 million in companies with a valuation between $1 billion to $5 billion. TTAD II does have the ability to invest $250 million or more, executives said.
The majority of TTAD II is available to invest. The fund has provided funding for Kaseya, an infrastructure software company; personal finance site Acorns; and thatgamecompany, a game studio.
“The market environment is pretty opportune for this type of fund,” Raj said.
TPG will likely ride high with the tech fund, at least until the IPO market returns.