Bain hits market with second tech fund

Bain Capital is back with its second tech-focused fund that looks for opportunities in the red-hot sector.

Bain Capital’s second Tech Opportunities fund is targeting $1.5 billion for investments in mid-market buyouts and late-stage growth for control and minority transactions. Fund II will focus primarily on North American companies and pursue investments in technology, including application software, infrastructure and security, fintech and payments, healthcare IT and internet and digital media.

Bain will look to invest in 10-15 companies through the pool. New Mexico State Investment Council committed $60 million to the fund this week, a follow-up to its $50 million pledge to Bain’s first tech fund.

According to an investment presentation at New Mexico SIC’s meeting this week, Bain will invest between $50 million and $250 million per deal. Bain’s tech program has 22 dedicated employees and four members of Bain’s portfolio group.

Bain also committed five times more money to the vehicle than it usually does, according to David Lee, director of PE at New Mexico State Investment Council.

“Although it’s a bit too early to judge Fund I’s track record, it is off to an outstanding start,” said Lee.

Bain’s first tech fund was generating a net 1.4x multiple and net 74 percent internal rate of return as of June 30, 2021, Lee said.

“We like the flexibility of pursuing growth equity minority investment in companies or more traditional control-oriented buyouts, as it allows the team to see a wide range universe of opportunities,” he said.

The tech fund also is able to make use of Bain’s resources as it works with its companies. “Right now, we are in an environment where prices are high, so the team can seek strategic initiatives to improve the company’s market position,” he said. “One of the real advantages of the fund, they can utilize the larger Bain platform for strategy and back office needs when necessary, something that other smaller firms don’t have the capabilities to.”

The fund terms also give two options to potential investors: one with higher management fees and lower interest and the other with higher fees and lower interest.