Bain Capital plans to capitalize on lower pricing for tech companies with a new $2.4 billion tech-focused private-equity fund that is nearly twice the size of its predecessor.
The firm will invest its Bain Capital Tech Opportunities Fund II LP in a dramatically different environment for tech deal making than the one it faced when it closed its roughly $1.3 billion debut tech opportunities fund back in 2020.
“There were a lot of companies which we just couldn’t invest in” during the frenzied deal making of 2020 to 2021, said Darren Abrahamson, a partner on the tech opportunities team.
During that time, not only were tech valuations high but many firms were making very quick investment decisions with less information about the companies they acquired, according to Mr. Abrahamson.
“That’s shifted dramatically,” he said, “and so, many of those companies today are actually interesting prospects for us.”
Philip Meicler, another partner on the team, said that the Boston-based firm is seeing valuations for technology companies falling to levels seen before the Covid-19 pandemic.
Bain Capital started its tech opportunities strategy in 2019 to target buyout and growth capital investments in smaller companies that are past the venture stage but not quite mature enough for the firm’s main private-equity portfolio. Typically, target companies average $50 million to $100 million in annual recurring revenue, firm executives said.
Like its predecessor, the latest capital pool will focus on investments in application software, financial technology and payments, healthcare information technology and infrastructure and security.
Bain Capital representatives didn’t disclose how much of the $2.4 billion was raised from outside investors but said that, as is typical for the firm, Bain Capital employees are the largest single investor in Bain Capital Tech Opportunities Fund II LP. One investor that disclosed a commitment to the fund is the New Mexico State Investment Council.
Bain Capital executives say they expect to make 10 to 15 investments, with average equity checks ranging from $75 million to $300 million.
So far, Bain Capital has made four deals out of the fund, including a minority stake in Ataccama Corp., a Toronto-based data management company that had been spun off from Czech Republic-founded Adastra Group. The firm also acquired in a secondary deal an additional stake in Lincoln, Neb.-based Hudl, whose legal name is Agile Sports Technologies Inc. Bain first invested alongside other backers in the provider of sports performance analysis technology in 2020 out of its debut tech opportunities fund.
Although Bain Capital executives said they expect North American companies to account for most of the new fund’s investments, they also see growing opportunities in Europe. The firm has shifted some of its personnel, including Managing Director James Stevens and Vice President Caroline Gray, to focus specifically on tech opportunities deals in the region. Mr. Meicler said the firm can leverage its resources and help European companies expand across the continent and even into the U.S.