Sixth Street closes second flagship growth pool at $4.4bn hard-cap

Sixth Street, spun out of TPG in 2020, secured $4.4 billion for a pair of funds earmarked for investing in late-stage growth companies.

Sixth Street Growth Partners II and Sixth Street Mid-Stage Growth Partners, launched last year, hit their combined hard-cap this month, the San Francisco firm said. The capital pool is twice that of the strategy’s debut vehicle, closed in 2019 at $2.2 billion.

Sixth Street Growth Partners II, the larger of the two, raised $3.6 billion, ahead of a $3.4 billion target, disclosed by New Jersey Division of Investment. Sixth Street Mid-Stage Growth Partners landed $800 million against a $750 million target.

Co-headed by partners Michael McGinn and Bo Stanley, the growth platform was established by Sixth Street to provide bespoke capital solutions to mostly US-based mid-to-late-stage companies with revenue of at least $20 million. Growth-oriented sectors of interest include business services, data infrastructure, enterprise software, fintech and healthcare IT.

Preferred opportunities have defensive business models, are profitable and/or have proven unit economics, and are well-managed. Investments of $25 million to $500 million-plus are made flexibly, taking the form of equity, debt or a hybrid of the two. Capital is used to finance organic expansion, acquisitions and recaps across all market cycles.

Sixth Street Mid-Stage Growth Partners follows the same approach as its larger companion but tends to write smaller checks for companies earlier in their lifecycle.

The growth strategy has an investment partner in Sixth Street’s Tao, a $26 billion cross-platform evergreen pool created by the firm more than a decade ago. Uniquely, Tao operates like a balance sheet, deploying capital opportunistically across an array of deals originated by flagship funds or on its own.

To date, more than $9 billion has been invested in over 70 companies under Sixth Street’s growth banner. Investments made by Fund I include Airbnb, Bloomreach, Datavant, Fullsteam, Kaseya and SnapLogic.

Fund II is already doing deals, last month putting up to $200 million to work in Atlas, an employer-of-record solutions and tech provider. Earlier this year, it also led a $400 million financing of Contentsquare, a digital experience analytics business. The mid-stage sidecar around the same time co-led a $170 million financing of Guesty, a property management platform.

“Today’s macroeconomic environment presents an exceptional opportunity for leadership teams with the right capital, strategy and partners to go on the offense and strategically take share through accelerated organic and inorganic growth,” Stanley said in a release.

McGinn and Stanley oversee a dedicated growth team of roughly 20 professionals, among them CEO Alan Waxman and vice chairman Martin Chavez.

Sixth Street has been adding to the team, this year recruiting four-time sponsor-backed CEO Jeffrey Stone as head of operations. Stone is leading a new program called “More than Capital’, which will provide operational expertise and value-added support to late and mid-stage growth companies in the portfolio using an in-house team and advisory network.

The firm also recently hired Nari Ansari as managing director, investments. Ansari came from TVC, where he was a partner focused on application software, industry-specific software, fintech and payments, healthcare IT and tech-enabled services.

Managing more than $60 billion of assets across a range of strategies, Sixth Street was founded in 2009 by Waxman and other partners, many of them former members of Goldman Sachs’ US special situations group. Its former parent organization, TPG, retains a minority interest.

(This story was updated to clarify Sixth Street’s 2020 spinout from TPG.)