Turn/River Capital is seeking $1.25 billion for a fifth tech-focused offering, a much higher goal than was set for prior funds, as digitalization continues to fuel the deal market.
The target for Turn/River Capital V was disclosed this month in Form D fundraising documents filed by the San Francisco private equity firm. No placement agent was identified.
The target is more than triple that of Fund V’s predecessor, which sought $350 million, and almost triple the $420 million brought in by Fund IV in a final close last year.
Technology, once largely absent from PE’s vocabulary, is today a market driver. This is reflected in North American fundraising, with tech strategies since 2016 accounting for $100 billion-plus in commitments per year, according to PEI data.
Tech could do even better this year, as 363 vehicles raised $172 billion in the first three quarters. That put fundraising in sight of the record $194 billion secured in the whole of last year and just shy of the $180 billion secured in 2019.
Step-ups in fund sizes, like Turn/River’s, and a faster fundraising pace, are key to these numbers. Tech PE giant Thoma Bravo, for example, in 2020 collected $22.8 billion across three pools and is now targeting $22 billion alone for a 15th flagship, Buyouts reported.
While the environment is conducive for funds coming back quickly with bigger tickets, GPs may encounter pushback from LPs. Many LPs are signaling an interest in seeing more results from existing funds before committing fresh capital.
Filling a gap
Turn/River was founded in 2012 by Dominic Ang, a former tech operator and executive with Vector Capital. Its raison d’être, Ang said on the firm’s website, was to back software companies that are often “too profitable for venture capital, still too small for private equity and too messy for strategic acquirers.”
Turn/River looked to fill this gap by specializing in buyouts, spinouts, growth equity investments, founder liquidity deals and recaps for lower mid-market tech, web and SaaS businesses.
Ang’s thesis is software investing “is best when done by a team of equal parts operators and investors.” To this end, Turn/River provides flexible capital and operational resources to help propel enterprise growth, emphasizing factors like customer success, sales and marketing and talent.
On average, portfolio companies have tripled sales by a third year of investment, Turn/River reported, without relying heavily on acquisitions.
No other specific investment criteria or strategic details are disclosed. Turn/River did not respond to a request for comment.
Turn/River’s global deals this year included a major exit. Pathwire, an e-mail delivery platform, was in December acquired by Sinch for $1.9 billion in cash and share issues. The main sellers were Thoma Bravo and Turn/River.
Turn/River in 2017 led a $50 million financing of Pathwire, then known as Mailgun, when the company spun out of Rackspace. Two years later, it sold a majority stake to Thoma Bravo.
The firm also added to the portfolio in 2021, investing $380 million in Redwood, a business process automation provider. It also reinvested in Invicti, an application security testing provider first backed in 2017. This was done alongside a $625 million investment led by Summit Partners.
The portfolio at present holds eight active investments, according to the website. Since 2014, Turn/River has exited eight investments, including Pathwire.
Managing partner Ang oversees a team of 44 investment, operations and other professionals. Senior members include partner, operations, Chase Sorgel; partner, investments, Joanne Yuan; and partner and COO Evan Ginsburg.