Blackstone looks to go big with second growth fund

Growth equity, while long a vital part of the private equity universe, has become a popular strategy, especially in connection with the rise of technology investing.

Blackstone is not wasting any time ramping up its growth platform.

The firm, which is just starting to raise what could become the largest-ever private equity fund, is also targeting $7 billion to $8 billion for its second growth fund, according to sources and a document from the Minnesota State Board of Investment.

Growth equity, while long a vital part of the private equity universe, has become a popular strategy, especially in connection with the rise of technology investing. Last year, growth equity hit an all-time fundraising high, with 121 North American growth funds raising more than $108 billion.

Blackstone’s second growth fund is live in the market now. Minnesota State Board of Investment recommended approval of a $150 million commitment to the pool earlier this month. A spokesperson for Blackstone declined to comment.

Fund II has a term of 11 years, subject to one-year extensions with approval of the majority of LPs. It has a five-year investment period from the commencement date of the fund, the documents said.

Blackstone’s growth team is led by Jon Korngold, who joined the firm in 2019 from General Atlantic, where he led financial services investments, including fintech. It focuses on making equity investments in the range of $200 million to $500 million in five core sectors: consumer, consumer technology, enterprise software, financial services and healthcare.

The fund is expected to have a concentrated portfolio and expects to be actively involved in each company’s strategic, operational and financial initiatives, the documents said. The team sources what it considers the best opportunities from those generated by Blackstone’s sourcing platform.

The growth group earlier this month invested more than $100 million in Cloudinary, a media experience cloud company, valuing the company at $2 billion.

“Blackstone believes that market forces are driving attractive growth opportunities in sectors at growth rates that significantly outpace GDP,” the Minnesota documents said. “This rising tide creates opportunities for all market participants and particularly strong opportunities for the best companies.”

The group closed its debut growth fund on $4.5 billion in 2020. The pool was generating a 43 percent net internal rate of return and a 1.2x net multiple as of 31 December 2021, according to information from Minnesota, which committed $250 million to the first fund.

Korngold leads a group of 38 professionals along with senior managing directors Christopher James, Ram Jagannath, Vini Letteri, Yifat Oron, Brian Sauvigne and Paul Morrissey.

Other big shops that have expanded into growth investing include Carlyle Group, which reported earlier this month collecting about $1.1 billion for its debut growth fund targeting $2 billion, and Brookfield, which closed a second growth pool last year on more than $500 million.

This article first appeared in affiliate publication Buyouts


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