KKR, a worldwide funding powerhouse, tells Ztoog completely that it just held a last shut of its third and newest tech growth fund — KKR Next Generation Technology Growth Fund III — with roughly $3 billion in capital commitments, $400 million of which came from KKR’s personal workers.
The crew, which contains greater than 35 traders centered on growth-stage firms in North America, Europe and Israel, with one other dozen centered on the APAC area, has been elevating the fund since early final 12 months.
According to a regulatory submitting, the group’s first, tech growth fund, sized at $711 million, boasts an IRR web of the agency’s charges of 26.6% at the moment, together with realized and unrealized positive factors. It has already returned extra to traders than the capital they dedicated. Its second effort, a $2.2 billion car closed in 2019, has largely unrealized positive factors and exhibits a roughly 18% web IRR.
Some of the outfit’s previous bets embrace Darktrace, the cybersecurity agency that went public in London in 2021, ForgeRock, a digital-identity software program firm that went public within the U.S. in 2021, and Lyft, which went public in 2019. Another wager, OneStream, which builds software program instruments and companies designed for chief monetary officers, reportedly tapped Morgan Stanley in late 2021 to steer preparations for a inventory market launch however the firm stays privately held.
If the latest fund was a problem to shut from its combine of backers, together with sovereign wealth funds, public pension plans, insurance coverage firms, endowments, and personal wealth platforms, fund head Dave Welsh doesn’t say so explicitly, although in dialog earlier this week, he sounded relieved to be finished with this newest fundraise. “Not to be too Pollyanna-ish about our own hand here, but we’re super glad we’ve got a new fund and we’re not out raising right now. I think it’s tough,” he mentioned.
KKR’s tech growth group focuses predominantly on minority transactions, however usually plugs one third of its capital into majority possession positions. (OneStream, based mostly in Rochester, Michigan, is one instance of the latter situation. KKR purchased up most of the younger firm again in 2019.)
Unsurprisingly, Welsh says the main target is on firms with “really strong growth prospects for the long term,” and at an earlier stage of the companies’ life than may curiosity KKR’s a lot larger buyout funds. A typical test may vary from $50 million to $250 million, for instance, the place the agency’s even bigger funds are normally writing checks of $500 million or extra.
The best holding interval is 4 to 5 years, although Welsh says the crew could be versatile. Ideal targets are already producing tens of thousands and thousands of {dollars} in income by the point KKR will get concerned. Welsh additional estimates that two thirds of the group’s portfolio firms have raised enterprise or institutional backing beforehand, with the remainder wanting extra like a standard PE goal, that means they’ve bootstrapped their approach to success or raised small quantities of funding from family and friends.
As for areas of focus going ahead, Welsh suggests the combo so far will seemingly stay the identical, with 70% of his unit’s capital flowing to software program firms, and largely cybersecurity firms, the place the chance is ever altering. The relaxation of its bets he refers to as “internet.”
Altogether, KKR’s tech growth observe has now raised just shy of $6 billion altogether from its backers. Others of its bets embrace the massive knowledge analytics firm Optimal+, the tour-booking platform GetYourGuide; and the cloud integration software program firm Jitterbit.