Morning, Term Sheeters. Luisa Beltran here, subbing for the Term Sheet team.
Today’s topic is fundraising, which has gotten more difficult this year and is taking longer for private equity firms. But sometimes a delay can be a benefit. Consider TPG, which just closed its second Tech Adjacencies fund, or TTAD II, at $3.4 billion. David Trujillo and Nehal Raj, TPG partners, are comanaging partners of TTAD.
TPG spent nearly two years fundraising for the TTAD II. (Marketing started in early 2021; TTAD II reached its target in 2022 and closed earlier this year, a person familiar with the fundraising said.) The pool invests in tech companies that are opting to stay private longer. That’s pretty much everyone in tech right now. Just two years ago, companies could go public by launching a traditional IPO or merging with a special purpose acquisition company, or, for the big, well-known businesses, using a direct listing. Those options are mostly not available right now. The IPO market, which has served as a funding source for many companies, has been nearly shut since the beginning of 2022. Venture fundraising has also dropped dramatically this year, while valuations across technology have also come down.
This has created a somewhat perfect storm for the TPG Tech Adjacencies fund. “We believe the recent tech slowdown has created the most attractive investing environment for TTAD since its launch in 2018,” said Jon Winkelried, TPG’s CEO, during a conference call to discuss fourth-quarter earnings on Feb. 15.
TPG established the TTAD funds to provide flexible capital to tech companies. TPG TTAD II has invested in Kaseya, an infrastructure software company; personal finance site Acorns; and thatgamecompany, a game studio. TTAD II will provide minority growth investments to companies across the technology sector including software and enterprise technology, as well as internet, digital media, and communications.
“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,” said David Trujillo, head of TPG’s internet, digital media, and communications investing efforts. Raj co-leads TPG’s investments in software and enterprise technology across its private equity platforms.
TTAD is one of several growth funds managed by TPG, which went public in January 2022 and now has $135 billion of assets. TPG was one of the first of the larger private equity firms to launch a growth fund, which makes minority investments and growth buyouts in companies that are at or near profitability. The firm’s first growth fund clocked in at $1.3 billion in 2007. More recently, in 2021, TPG Growth V collected $3.6 billion.
Read more of my story on TPG’s latest tech growth fund here.
Until next time,
Luisa Beltran
Twitter: @LuisaRBeltran
Email: luisa.beltran@fortune.com
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