Insight Venture Partners has raised $6.3 billion for its latest (and largest ever) fund as technology investors continue to amass increasingly large war chests.
In the wake of SoftBank’s massive $100 billion Vision Fund, investors in technology companies have said that capital has become weaponized as a way to create a competitive moat around a startup’s business — ostensibly giving it so much money that investors become de facto kingmakers for the companies they back, rather than simply enablers for success.
That redefinition of the investors’ role — in a way trying to circumvent competition in a market by fiat — has led funds to follow SoftBank’s lead and try to raise increasingly large funds. That’s why Sequoia juiced its fund to a whopping $8 billion (and has already closed on $6 billion for it).
However, Deven Parekh says Insight Venture Partners isn’t simply following the herd with its latest raise. The firm is staying true to its mission of investing in companies, and continuing to commit the same amount of capital it always has, Parekh says.
“Our fund size has gone up and our portfolio size has gone up,” says Parekh. “The competitive dynamics is not the driver here as much as the types of companies we invest in.”
Still, the pace of investment has been pretty blistering. It was only three years ago that the company closed its ninth fund with $5 billion in capital commitments.
As technology commands an increasingly large share of the economy, it makes sense for the firm to raise more cash because there are simply more opportunities to deploy it, according to Parekh.
But competition is also something the firm is wary of — especially as technology becomes more popular for generalist investors.
“It’s hard to argue that the market is not more competitive today,” he says. “There’s significant growth in firms focusing on tech investing.”
However, many of the growth capital and private equity investors that are beginning to invest more heavily in technology don’t have experience in the industry, which is creating upward pricing pressure on deals, says Parekh.
“You have a lot of generalists going after software who don’t have a point of view on these assets,” he says. “The multiples are being paid without having a point of view.”
Since it was founded in 1995, Insight has always had a point of view on the software industry. The firm was one of the early pioneers in growth capital investing into technology companies and has always been more of a later-stage investor — writing larger checks for companies that it backs once they’ve found traction in the markets that they’re serving.
That strategy has served the firm well through deals in companies like Pluralsight, Smartsheet, Delivery Hero, HelloFresh, Yext and Alteryx (to name a few of the firm’s recent wins).
“The closing of Fund X is a historic moment in Insight Venture Partners’ 20 plus year history, demonstrating continued confidence by our global investors in our ability to invest in industry-leading software companies,” said Jeff Horing, co-founder and managing director, Insight Venture Partners, in a statement.