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.
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. ”
TTAD is led by David Trujillo, the firm’s head of internet, digital media & communications, and Nehal Raj, head of software & enterprise technology.
“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.
Investors in TTAD include the State of Hawaii Employees’ Retirement System, the Texas Teacher Retirement System, and the Canada Pension Plan Investment Board, per documents from those funds.
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TPG oversees $104 billion across strategies.