JMI Equity days away from first close of $2bn Fund XI

JMI Equity, a 30-year veteran of software-focused growth equity investing, is expected to hold an initial close for its 11th flagship offering this month, sources told Buyouts.

JMI Equity Fund XI is targeting $2 billion, a report by Massachusetts Pension Reserves Investment Management said, confirming a Form D disclosure made earlier in February by the Baltimore private equity firm. Stifel is the placement agent.

With Fund XI, JMI appears to be tapping into key themes of last year’s vigorous fundraising market. One of them is a faster pace of fundraising.

The new flagship offering comes less than a year after JMI announced the closing of Fund X at $1.7 billion. In contrast, more than two years separated Fund X and its predecessor, completed in 2018 at $1.2 billion.

This perhaps speaks to the frenetic space in which JMI invests. The covid-19 pandemic is widely recognized as having sped up the digitalization that companies were already bringing to customer and supply-chain interactions, internal operations and product portfolios. In the process, it significantly increased tech’s role and influence in PE dealmaking and fundraising.

Evidence of this was seen in 2021 when tech PE fundraising set a new record. Some 474 North American funds – among them, JMI Equity Fund X – secured nearly $227 billion, according to Buyouts data, up 14 percent from the prior peak of $200 billion raised in 2020.

JMI was founded in 1992 by Harry Gruner and Charles Noell, formerly tech specialists with investment bank Alex. Brown, in partnership with John Moores, founder and ex-CEO of BMC Software. Gruner continues to lead the firm alongside co-managing general partner Peter Arrowsmith, who joined in 1996 and was promoted last year.

Over time and 170-plus investments, JMI has maintained a focus on lower-mid-market businesses in software and tech-enabled service sectors in North America and Europe. Verticals of interest include the cloud, digital health, education, energy, financial services, government and non-profit, HR, IT and infrastructure, sales and marketing, security and workforce management.

Software companies targeted by JMI are B2B-oriented and IP-rich, have recurring revenue, operate in defensive market positions and have strong long-term prospects for organic and inorganic growth. The firm invests $20 million to $200 million, acquiring either control or minority stakes.

JMI was an active dealmaker throughout 2021. New activity included a $100 million investment in OnBoard, a cloud-based board management solution; an investment alongside Thoma Bravo in Condeco, a workspace scheduling tech provider; and an $85 million investment led for Service Trade, a software platform for commercial service contractors.

More than 30 investment professionals work in JMI offices in Baltimore and San Diego. Along with Gruner and Arrowsmith, senior team members include chairman Paul Barber and general partners Larry Contrella, Matt Emery, David Greenberg, Randy Guttman, Brian Hersman, Bob Nye, Sureel Sheth and Suken Vakil.

JMI declined to provide a comment on this story.

(Update: Drawing on information contained in a pension document, an earlier version of this story incorrectly said JMI was set to hold a final close of Fund XI this month. The story and headline have been updated.)