TPG just raised $1.6 billion for a tech-focused fund after bets on Uber, Spotify, and other private companies paid off big - and shows some of the problems with current funding models
- TPG has raised $1.6 billion for its debut technology-focused fund, TPG Tech Adjacencies.
- Through other funds, the private equity giant has invested in a variety of private tech companies, including Airbnb, Uber, and Spotify.
- Those investments led TPG to identify problems with companies staying private for longer, such as employees needing liquidity. The firm created this fund to buy into some of those opportunities that didn't fit into its traditional private equity funds.
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TPG has made big money off of technology bets on companies like Uber, Airbnb, Spotify, and Box. Now, it's raised a new fund to profit from private companies in a different way than its traditional private equity roots.
As the private equity firm invested $9 billion in startups, executives saw a number of issues related to companies staying private for longer, largely related to liquidity. Current and former startup employees struggled to sell their shares, and venture capital investors came to the end of their funds' lives without the traditional IPO exit, among other problems. The secondary market - where shareholders can trade their private shares - provided some relief, but often at unfavorable financial terms and in trades that provided more opportunities for financial information to leak.
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Some investors and companies gave TPG the option to buy their shares or participate in other investments outside of funding rounds, but the options didn't fit neatly into the firm's private equity fund structures. In response, the firm founded TPG Tech Adjacencies (TTAD).
On Monday, TPG said it raised $1.6 billion for the fund, which is set up to "provide flexible capital for founders, employees, and early investors looking for liquidity, as well as primary structured equity solutions for companies looking for additional, creative capital for growth. "
"Through our portfolio and day-to-day interactions with leading private tech companies, we've seen a new set of financing demands arise that are unique to companies staying private longer," Trujillo told Business Insider. "We created TTAD to help address these investment opportunities. It is another tool in our toolkit for entrepreneurs and businesses across various stages of growth."
A source close to TTAD said the fund has already invested in seven companies, the majority of which are new investments for TPG. The seven investments include IT software Kaseya, software developer Sonatype, payments company FreedomPay, discount hotel booking platform Hotel Tonight, and platform testing company Sauce Labs.
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TPG oversees $104 billion across strategies.
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