Insight zeros in on Fund XIII’s $15bn cap as tech fundraising takes a dive

Insight Partners is set on a $15 billion hard-cap for its 13^th tech offering, sources told Buyouts, as the firm navigates a brutal fundraising market.

The size of Insight Partners XIII has been a mystery since the flagship fund’s launch last year, with a range of targets reported. They include the $17 billion reported in June by Buyouts, citing Pennsylvania Public School Employees’ Retirement System as the source.

Last week, Massachusetts Pension Reserves Investment Management disclosed a $12.5 billion target for Fund XIII. The amount was split between two pools, apparently reflecting the control and non-control aspects of the flagship’s software strategy.

Sources did not dispute the MassPRIM number but said Insight is treating the $15 billion cap as the primary objective.

Fund XIII, which has to date raised $3 billion according to Form D documents, is expected to continue raising capital over this year and into 2024, sources said.

After rising steadily over the past decade, North American tech private equity fundraising recently took a dive. While dedicated vehicles secured a record $150 billion last year – led by the $24.3 billion Thoma Bravo Fund XV and the $17.2 billion Insight Partners XII – fund closings declined by 41 percent from 2021, Buyouts data show.

Activity fell-off more sharply in the first half of 2023. Dedicated tech funds brought in $33 billion at the end of June, down 43 percent from a year earlier, while fund closings, totaling 84, dropped 53 percent.

Of course, tech firms are facing the same challenges as the rest of the private equity industry, with tough supply dynamics compelling GPs to extend timelines and rethink targets. They are likely also encountering issues unique to tech investing – most of them linked with a correction in values that originated with last year’s rout in public markets.

A “great reset in tech” led Insight to pull back from a $20 billion target initially contemplated for its latest flagship, the Financial Times reported in June.

Founded in 1995, Insight invests in growth-oriented companies in software, software-enabled services and internet sectors. It has a particular yen for software-as-a-service, subscription-based business models with a high degree of recurring revenue.

Insight’s approach to dealmaking is flexible in nature, with an emphasis on locating the most attractive, highest-growth opportunities across the innovation landscape. As such, investing often straddles the buyout, growth equity and venture capital segments of the market.

The 2020-vintage Insight Partners XI was earning a 21.1 percent net IRR as of December 2022, according to California Public Employees’ Retirement System data. The 2018-vintage Fund X was earning a 28.3 percent net IRR.

PA Schools’ board voted narrowly in favor of a $130 million commitment to Fund XIII, Buyouts reported, with Pennsylvania Treasurer Stacy Garrity pointing to performance concerns and Insight’s investment in the failed cryptocurrency brokerage FTX.

The firm turned down the commitment due to pressure from Governor Josh Shapiro, the Philadelphia Inquirer reported.

Insight declined to provide a comment on this story.