Side Letter: Thoma Bravo’s timing; PE’s job creation credentials; Korea’s VC support

Thoma Bravo's apparent eagerness to hit the fundraising trail could prove advantageous at a time when the process is slower-going. Plus: Invest Europe shines a light on PE's job creation credentials; and Korea's government wants to back domestic VCs. Here’s today's brief, for our valued subscribers only.

Just happened

Thoma’s timing
A sluggish fundraising environment doesn’t seem to be impacting Thoma Bravo‘s ambitions. The software giant is expected to return with both its 16th flagship and fifth mid-market Discover fund in the fourth quarter of this year, according to our colleagues at Buyouts (registration required). Targets for the vehicles are as yet unclear. The firm is also said to be quietly marketing its debut Europe-dedicated vehicle, for which it is seeking €1.5 billion.

Thoma Bravo’s expected return could come less than a year after closing Fund XV, which, at $24.3 billion, was the second-largest fund of 2022. Its Discover Fund IV also closed in December last year on $6.2 billion. Earlier flagship vintages, such as Fund XIV, had generated a 0.97x TVPI and -3.15 percent IRR as of 30 June, according to UTIMCO data. Fund XIII, on the other hand, had generated 1.72x and 37.4 percent, per Florida Retirement System Trust Fund.

It’s worth noting that speedy returns to market aren’t out of the ordinary for Thoma Bravo: the firm launched Fund XV in August 2021, having closed its predecessor in October 2020, according to PEI data. Still, the fact the firm could return with another mega-fund so soon after its latest could present something of a headache for LPs, many of whom have struggled to balance the pace and scale of re-up opportunities with the denominator effect and macroeconomic uncertainty over the past year.

However, with other top managers stretching their timelines and voicing uncertainty over whether targets can be met, coming back to market sooner rather than later may enable firms to spend longer on the fundraising trail without fear of running out of dry powder to deploy.

PE does the job
A new report published by industry body Invest Europe outlines private equity and venture capital’s contribution to Europe’s pandemic recovery. The fourth edition of its Private Equity at Work report, released today, found that PE- and VC-backed companies added nearly 342,000 net new jobs across the continent in 2021. More tellingly, PE and VC outperformed the European economy in 2021, adding 6.5 percent more jobs across portfolio companies versus an average 1.2 percent rate across Europe more widely.

Companies backed by PE and VC employed 10.5 million people in 2021, supporting workers in more than 26,000 firms. Central and Eastern Europe was the most dynamic region for PE job growth in 2021 (10.6 percent more employees), followed by the Nordics (9.4 percent) and the DACH region (7.3 percent).

PE continues to face criticism from some quarters over its business growth model and contribution to the real economy (something Partners Group’s Steffen Meister refutes in a new white paper today). This latest Invest Europe research is further evidence that much of this criticism doesn’t seem merited.


New ventures
A handful of recent fund closes suggest the VC and growth equity fundraising scene hasn’t completely frozen over. Last week, European life sciences firm Forbion closed two funds on a combined €1.35 billion, per a statement. Forbion Ventures Fund VI and Forbion Growth Opportunities Fund II hit their €750 million and €600 million hard-caps, respectively. New LPs in the former included Dutch pension funds PME and PMT, Loyola University of Chicago, the Scott Trust Endowment Fund, and Pictet Alternative Advisors; the latter added Amundi and Legal & General Capital.

The 2020-vintage Forbion Capital Fund V, Forbion’s previous VC vintage, and the 2021-vintage Forbion Growth Opportunities Fund I raised €460 million and €360 million, respectively, according to PEI data.

Meanwhile, JPMorgan Growth Equity Partners’ maiden fund has held a final close on more than $1 billion. The fund pooled commitments from institutional and family investors across the US, Europe and Asia-Pacific, and will back venture and growth-stage companies ranging from Series B to pre-IPO, according to a press release. “We are pleased to have raised in excess of $1 billion for our inaugural fund, particularly in a challenging market environment where only two venture funds over $1 billion were raised last quarter,” said managing partner Christopher Dawe.

Growth equity funds raised $96.8 billion last year, down 27 percent from the prior year, according to PEI data. VC fundraising declined less sharply, falling 6 percent to $170.8 billion.

While we’re on the subject…
Korea’s Ministry of SMEs and Startups has unveiled a 1 trillion won ($749 million; €682 million) fund of funds to bolster domestic venture capital, per a statement. The move is intended to catalyse more than 2 trillion won of fundraising by Korean GPs and help tackle the country’s roughly 11 trillion won investment shortfall as of the end of 2022. The MSS said it is improving relevant laws, systems and infrastructure to provide support for Korean start-ups that are advancing and growing abroad, while developing various policies to help foreign talent launch businesses in Korea.

The ministry’s efforts come amid a slump in VC dealmaking and fund formation this year. Investment values fell 60 percent year-on-year in the first quarter to 0.9 trillion won. Korean VC funds, meanwhile, raised 0.6 trillion won in Q1, a roughly 79 percent decrease year-on-year.

“As venture investments are shrinking worldwide due to combined crises such as high interest rates, high prices and the global risk of financial institutions, it will be necessary to keep an eye on the market,” said minister Lee Young in a separate statement. “The government deems it necessary to take various policy measures in order to overcome this situation.”

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

24 April

25 April

26 April

27 April

28 April

Today’s letter was prepared by Alex Lynn with Carmela Mendoza, Helen de Beer and Katrina Lau.