Georgian, a low-profile software investor with a unique value-creation model, raised nearly $900 million for a sixth flagship growth equity offering, sources told Buyouts.
Launched in late 2021, Georgian Partners Growth Fund VI wrapped up in September, sources said. Though finishing shy of a $1 billion target, the flagship is still the largest in the firm’s 15-year history, just exceeding the size of its 2020-vintage predecessor.
A mix of first-time and returning LPs committed to Fund VI, many of them early on, sources said. Disclosed investors include Caisse de dépôt et placement du Québec and Massachusetts Pension Reserves Investment Management.
Georgian also closed Georgian Alignment Fund II, a blind-pool strategy intended to create more time and money to back some of the portfolio’s starriest software assets. The fund secured about $500 million, sources said, bringing the total haul to $1.4 billion.
The new blind-pool vehicle follows Fund I, closed in 2021 with the same goal of extending investing for major assets. However, while the first fund relied on secondaries investors led by CPP Investments, Northleaf Capital and StepStone, Buyouts reported, its successor was capitalized by primary investors, sources said.
Georgian is part of the growth equity asset class that has emerged strongly in recent years alongside historic technology adoption in the economy. Today, growth equity is slowly coming back from a market reset triggered by the 2022 collapse of public tech values.
As a result, a prior market emphasis on lofty prices and growth-at-any-cost has yielded to tempered expectations and more efficient growth. And in a less competitive space, pure-play growth equity shops with capital are strengthening portfolios and seeking vintage opportunities.
Georgian was founded in 2008 by lead investor and head Justin LaFayette, lead investor Simon Chong and head of operations John Berton. Its origins are operational, with LaFayette, Chong and others formerly leading data-integration software maker DWL, acquired in 2005 by IBM.
How Georgian invests
Through its flagship strategy, Georgian invests $25 million to $75 million in global B2B software businesses with recurring revenue, strong unit economics and a plan for disrupting large markets. Companies of interest are aligned with key investment theses: applied AI, data privacy, security and trust and product-led purpose.
Like other private equity firms, Georgian amasses operational resources to facilitate post-investment organic and M&A growth. Uniquely, it goes a step further with hands-on programs to help companies anticipate and absorb fast-moving innovations, particularly in the world of AI.
Georgian’s AI Lab focuses on the adoption of AI and generative AI. A team of scientists and machine learning engineers both train portfolio companies and support their building of prototypes to create more differentiated products.
Another program, Georgian Grow, is a proprietary, machine learning-enabled software product. Using the data of portfolio companies, it looks to increase sales conversion rates. And Georgian Growth Network, a digital community of 2,000-plus software executives, allows businesses to learn from one another and, in so doing, develop content.
Along with producing more competitive, higher-growth companies, the value-creation model helps Georgian attract and retain top entrepreneurial and tech talent, sources said.
Deploying fresh capital
Georgian’s sixth flagship and second alignment funds have already begun doing deals. Fund VI has made seven platform investments, sources said, bringing the current portfolio to 46 companies and total platforms since inception to 68.
Fund VI’s investments include Island, developer of a security-first enterprise browser. Last November, the company announced a $60 million financing extension led by Georgian.
In addition, Fund VI earlier in 2023 led a $33 million financing of Dagster Labs, an open-source, cloud-native data orchestrator. Later in the year, it led a $35 million financing of Darrow, an AI-enhanced intelligence platform for the legal industry.
The new blind-pool vehicle has so far closed two deals, sources said. In 2022, it was the main player in a $325 million financing of eSentire, a cybersecurity and managed detection and response solution majority owned by Warburg Pincus. Georgian first invested in eSentire in 2014.
The fund was also deployed by Georgian when it led last year’s $170 million financing of OpenWeb, a community engagement platform that improves the quality of online conversations. OpenWeb was initially backed by the firm two years ago.
The $6.3-billion Georgian employs roughly 120 professionals in its Toronto office, a large fraction of them engaged in AI Lab and other value-creation programs. Other senior team members include lead investors Tyson Baber, Steve Leightell, Emily Walsh and Margaret Wu, as well as R&D head Madalin Mihailescu and AI head Parinaz Sobhani.
Georgian declined to provide a comment on this story.
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