Robert F. Smith’s Vista Equity Partners raises $850 million for second early-stage software fund: sources

Reuters | Robert F. Smith and his private equity firm Vista Equity Partners has raised US$850 million for a 2nd fund dedicated to investing in early-stage enterprise software companies, people familiar with the matter said on Wednesday.

The fundraising underscores investor appetite for fledgling software businesses, many of whom are benefiting from the expansion of cloud computing because they offer their software to clients as a subscription service.

Vista finished fundraising for Vista Equity Endeavor Fund II at its self-imposed “hard cap” limit, or the maximum it could raise, the sources said, requesting anonymity as the details are private.

It follows on from the US$560 million raised in 2017 for Vista’s first Endeavor fund.

The Endeavor strategy is to partner with founders of high-growth enterprise software businesses with US$10 million to US$30 million in annual recurring revenue, typically investing at the series B or C rounds of fundraising.

Most investments center around software-as-a-service companies, an industry where global revenue is set to hit US$94.8 billion in 2019 and rise to US$143.7 billion by 2022, according to research firm Gartner.

The first Endeavor fund has so far deployed around two thirds of its capital through 7 investments, one of the sources said.

Part of Vista’s pitch to software entrepreneurs is its internal 125-person consulting team, Vista Consulting Group, which works with companies to quickly scale up a business.

The Austin, Texas-based Vista is one of the world’s largest investors in enterprise software with over US$46 billion in capital raised since it was founded in 2000 by Smith.

Vista is also in the process of raising its latest technology-focused buyout fund, Vista Equity Partners Fund VII, which was launched in 2018 with a US$12 billion target, according to fund documents on the website of the New Jersey Division of Investment.

Smith made headlines earlier this year by pledging to pay off the student loan debt of the entire class of 2019 at Morehouse College in Atlanta, Georgia.