Luminate eyes $1bn for third fund as growth tech flourishes

Luminate Capital is heading for a milestone as it eyes the billion-dollar mark for its third pool.

The firm, formed by ex-Silver Lake executive Hollie Haynes, is among a handful of growth tech investors that have grown quickly in a market ripe with opportunities.

Other firms that have quickly grown in a similar fashion include Rubicon Technology Partners, formed in 2012, and Serent Capital, formed in 2008.

At the $1 billion mark, Luminate would jump from its $425 million second fund, closed in 2018. Fundraising will likely wrap up over the next few months, sources said. Luminate reported raising more than $890 million for Fund III earlier this month, on a $950 million target, according to a Form D fundraising document.

Reaching the $1 billion mark will be a transformative moment for the firm, which Haynes launched in 2014. Based on market reception, Luminate raised the goal for Fund III from last year, at which time the target was $700 million, according to a Form D from November.

The firm closed its debut fund in 2017 on $265 million.

Luminate focuses on investments in software and software-enabled services businesses in the middle market, according to the firm’s website. The firm announced in January that it had sold AMTdirect, which provides lease accounting, administration and facilities management software, to MRI Software.

Haynes leads the firm along with partners Dave Ulrich, who joined in 2017 from Mainsail Partners, and Andrew Baldwin, who joined last year from Western Technology Investment.

Software investing is one of the hottest growth areas in private equity. Firms like Vista Equity, Insight Partners and Thoma Bravo are chasing billions for investments in software companies. While those firms have grown from mid-market focused to the larger segment, the smaller firms that emerged over the last decade, like Luminate, have quickly grown and moved solidly into the mid-market.

“Everyone moved up. Thoma Bravo and Insight moved into the mega-funds, the mid-market firms filled the void, and the lower mid-market [firms] have moved up,” said a private equity investor not connected with those firms. “They’re all still chasing the same general types of businesses, but the scale is different.”

Rubicon Technology closed its third fund on more than $1.25 billion last year, on an $850 million target. The firm had raised at least $536.8 million for its second fund, according to a Form D filing in 2017. It closed its debut fund on $305 million in 2014, Buyouts previously reported.

Serent Capital closed its fourth fund, focused on tech and services, on $750 million last year, jumping from its $572 million third fund that closed in 2017.