TCV set to hit competitive tech-growth market with fresh $3 bln pool

Technology Crossover Ventures has a fresh pool of $3 billion for what it sees as a great opportunity to buy into tech-enabled consumer and business and enterprise technology companies, Nathan Sanders, COO and general partner, told VCJ.

TCV said on Jan. 31 that it closed its 10th fund and plans to begin investing it this quarter.

The Palo Alto, California, firm, known for late-stage investments in LinkedIn, Netflix, Spotify and Airbnb, exceeded its fundraising goal by $500 million amid strong investor appetite for tech-growth exposure, Sanders said.

“There was more demand for the fund that we can accommodate,” Sanders said. “We set the target for $2.5 billion with a cap at $3 billion, but even then it was oversubscribed.”

The vast majority of investors in Fund X are existing investors, Sanders said.

TCV will be looking to make some 20 investments from Fund X.

Founded in 1995, TCV invests in public and private tech companies, focusing on internet, services, infrastructure and software.

With Fund X, the firm will invest primarily in the U.S. but will also pursue relevant opportunities in Europe. TCV will also scout for tech stars outside the traditional U.S. tech centers.

“We look for companies in the Midwest and Indianapolis, across the board. Silicon Valley is not the only place to build a great company. We saw smart people building great companies elsewhere,” Sanders said.

Despite a high-valuation environment, TCV expects returns to stay consistent to those it had with Funds VIII and IX, sources familiar with the fund said.

Fund IX, which closed on $2.5 billion in 2016, is too young to show meaningful performance. Fund IX has made 21 investments to date. That fund also surpassed its initial target by more than 14 percent.

Fund VIII, which closed on $2.23 billion in 2014, was generating a 16.1 percent net IRR as of Sept. 30, 2018, performance information from Maine Public Employees Retirement System shows.

Meanwhile, Carlyle Group on Jan. 31 said it closed CETP IV on €1.35 billion ($1.54 billion) for investments in lower-middle-market technology-focused companies in Europe and the U.S.

But while competition among tech growth investors continues to increase, the rise of capital in the space is balancing out the competitive landscape, Sanders said. Tech investments are the most common area of growth in investors’ portfolios, he added.

“It really comes back to the principle that technology is continuing to find new ways to enter our lives,” he said.

Action Item: Contact TCV at +1 650-614-8200.