- Could start marketing Fund VII as soon as Q1
- Expected to target at least as much as Fund VI
- Has already deployed up to three quarters of Fund VI
Vista Equity Partners has quickly deployed about three-quarters of its sixth fund and will likely start to raise its seventh this year, three sources told Buyouts.
It’s not clear when Fund VII will hit the market. One source said the fund could hit the market as early as the first quarter. Other sources said they expect Fund VII in the second half of the year. One source said they expected the target to exceed the Fund VI total.
As for the size, the three sources said they expected Vista to target at least what it raised for Fund VI, which closed on about $11 billion in May 2017. That total included a $500 million GP commitment.
Los Angeles County Employees’ Retirement Association included Vista Fund VII on its forward calendar for funds it expects back this year.
Vista Fund VI is already roughly 70 to 75 percent deployed, two of the people said. That puts it on a brisk investment pace, being that the fund held a first close in 2016.
The firm focuses solely on enterprise-software investments, tapping into what Founder Robert Smith calls the “fourth industrial revolution.” This is fueled by the ubiquity of computing power, expanding connectivity and the growth of the so-called Internet of Things.
“What Robert is saying is that we believe that the computing revolution — as radical as it’s been so far — is still just in its infancy,” Vista Principal Rene Yang, co-head of the firm’s small-cap strategy, told Buyouts in a recent interview.
“The macro trends that he highlights are either still nascent or still in the steep part of the curve. At Vista, we believe they’ll unleash thousands of scalable and valuable new businesses.”
Vista, based in Austin, Texas, has several fund families, including its flagship vehicle, its middle-market Foundation Funds and its small-market Endeavor funds. It also has credit funds and a hedge fund program.
In addition, the firm has been talking to potential limited partners about a debut permanent capital vehicle called Vista Perennial Investing. The firm hired Burke Norton, former executive at Salesforce, as co-head and principal of Vista Perennial. The firm hadn’t settled on a target as of November. Sources said Vista was gauging interest in the fund before settling on a target.
Fund VI, still early in its J-curve period, generated a 0.97x total value multiple as of Oct. 31, 2017, performance data from New Jersey Division of Investment shows. Fund V, which closed on $5.8 billion in 2014, produced a 1.19x multiple, New Jersey said.
Fund IV, which closed on $3.5 billion in 2012, generated a 1.86x multiple as of the same date, New Jersey said. And Fund III, which closed on $1.3 billion in 2008, produced a 2.56x multiple, according to New Jersey.
Vista has generated an average gross IRR of more than 60 percent on all realized deals over the past eight years, according to a person with knowledge of the firm.
Clarification: The story has been updated to indicate Robert Smith is founder of Vista, while Brian Sheth is co-founder.
Action Item: See Vista’s Form ADV: http://bit.ly/2AJi78r
Robert Smith, founder, chairman and CEO of Vista Equity Partners, speaks at the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2016. Photo courtesy Reuters/Lucy Nicholson