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JMI keeps steady fundraising pace with $1.3bn Fund X

The firm focuses exclusively on software companies, a sector seeing very positive headwinds amid the covid crisis.

JMI Equity is targeting $1.3 billion for its tenth software-focused growth equity fund, according to a Form D.

The firm is maintaining a steady growth rate from fund to fund in the recent boom in tech investing amid the coronavirus pandemic.

JMI Equity Fund X will continue the strategy from the firm’s previous funds, which is focused exclusively on software companies, according to a memo from New Mexico State Investment Council.

It looks for companies with more than $10 million in annual revenue that have “recurring revenues, high gross margins and low capitalized expenditures.” Investment ranges are usually between $25 million and $150 million. The firm can take either majority or minority positions.

An accompanying presentation from the firm said its investments tend to average $35 million in annual revenue, 35 percent average revenue growth, a $45 million equity check and a $165 million enterprise value.

Fund IX closed on $1.2 billion at the end of 2018, according to a press release. That was slightly over its $1.1 billion target, which Buyouts reported. Fund VIII, a 2015 vintage, closed on $1 billion.

According to the California State Teachers’ Retirement System website, as of March 31, 2020, Fund IX had a 1.38 percent net internal rate of return. However, the fund was still in its J-curve, a period early in a fund’s life before investments mature, so performance is expected to improve over time.

Fund VIII had a 19.4 percent net IRR, according to CalSTRS. Fund VII, a 2011 vintage, had a 15.43 percent net IRR, and Fund VI, a 2007 vintage, had an 11.38 percent net IRR.

According to JMI’s Form ADV, JMI’s carried interested is generally the industry standard 20 percent. Management fees start at 2 percent and decrease by 10 percent per year after a fund’s investment period.

Technology has seen very positive headwinds amid the coronavirus crisis, which has increased dependence on remote working technology. Big tech PE firms like Silver Lake, Thoma Bravo and Insight Partners have all closed big, oversubscribed funds amid heavy investor interest.

Through a spokesman, JMI Equity declined to comment for this story.

Action Item: read JMI Equity’s Form ADV here.