Francisco Partners’ DJ Deb outlines ‘complexity arbitrage’ strategy; Goldman Sachs, Sixth Street and FTV Capital make bets on fintech
Happy Monday, PE Hubsters! Rafael Canton filling in for MK Flynn on the US edition of the Wire from the New York newsroom.
We’ll focus on the tech sector in this Wire. We’ll begin with Francisco Partners, which announced the closing on $21 billion in capital commitments across its FP VIII flagship fund and its mid-market Agility IV fund in July. To learn more about investing during this period of AI-led disruption and what Francisco was hearing from its LPs, I caught up with Dipanjan ‘DJ’ Deb, co-founder and CEO at Francisco Partners.
Then, we’ll look at some recent deals in the fintech sector from Goldman Sachs Alternatives, Sixth Street and FTV Capital.
AI potential
“As you can imagine, there’s a lot of turmoil in the world with what’s happening geopolitically, and within the software and AI worlds,” Dipanjan ‘DJ’ Deb, co-founder and CEO of Francisco Partners, told PE Hub in a wide-ranging interview on the heels of closing the biggest fundraise in the firm’s 27-year history.
“There were a lot of questions from our investors about that during the fundraise, but ultimately, we had people step up,” he said.
Despite the constrained fundraising environment in the technology sector, Francisco Partners in July announced the closing on $21 billion in capital commitments across its FP VIII flagship fund (which raised $16.4 billion) and its mid-market Agility IV fund (which raised $4.6 billion). The funds exceeded their initial targets of $14 billion and $3.5 billion and bring FP’s total capital raised to more than $75 billion.
The San Francisco-based firm is still investing out of its $13.5 billion FP VII and $3.3 billion Agility III funds. It expects to make the initial deals from FP VIII and Agility IV in the fourth quarter.
Here are excerpts from PE Hub’s conversation with Deb about how the firm expects to invest the new funds and about the current climate for tech investing.
As an investor, has AI fundamentally changed how you evaluate tech businesses, or is it changing what kinds of businesses can become attractive buyout targets?
AI is profound. I think we all need to stop being prisoners of the moment. Before people had electricity, automobiles, trains or cars, the world was different. If you look at history, there’s been huge innovation. We’re going into one of those revolutionary periods right now, and this is the closest thing to the internet, so it is impacting everything.
Every company we look at, we have to see what the potential for AI is in this industry. Will it hurt terminal multiples? Will it help terminal multiples? Can the company be dislocated? We take that into account.
I think we’re sitting on a massive bubble. But just because venture capitalists are saying this is going to change everything, it won’t change everything. Some things won’t change. There will be five or six companies that come out of this that will be multi-trillion-dollar companies just like there were in the last cycle, and I think 90 percent of the companies will lose a ton of money. It may take a little bit longer for the bubble to play out. But the one thing that never changes is human nature. I saw this in 1999 and 2000, and I saw this with the great financial crisis. And I think we’re seeing some of that again.
Do you have confidence in the exit environment going forward in software and technology?
Yes, I do, because things tend to be cyclical. Once people realize that AI will not eat everything, the exits will come back. But it may take a little time.
When do you think that it would be?
If I had to take a guess, it would probably be a year from now.
How do you expect to invest from the recently closed funds?
We are organized by 12 different verticals. A partner runs each of those verticals, whether that’s in industrial tech, healthcare tech, edtech, fintech, semis, etc.
In our view, the best ideas are going to win out. That may mean division carve-outs, buying from founders, going private or structured investments. We don’t have a prescribed view on how we’re going to deploy capital, just that we’re going to deploy it over three to four years.
We’re going to keep doing what we have done. But obviously, taking into account what’s happening with the world, we call our strategy “complexity arbitrage,” which means you buy confusion, hopefully at a discount, and you sell clarity, hopefully at a premium. That will keep being the core ethos of our strategy.
Tech advancements
One of Francisco Partners’ areas of focus is fintech, which has seen a lot of activity for PE dealmaking. As PE Hub Europe editor Craig McGlashan noted in our March Sector Spotlight for financial services, the increase of technological advancements like AI is creating opportunities in the industry. Let’s look at some recent deals.
In July, Goldman Sachs Alternatives agreed to acquire Aegis Hedging Solutions. Based in Texas, Aegis is a provider of commodity market intelligence, technology, and market infrastructure. Greenbelt Capital Partners and Baird Capital will exit the business following the transaction closing.
Founded in 2013, Aegis works with 700 commodity producers and consumers, capital providers, and financial counterparties across North America. The transaction is expected to close during the third quarter of 2026.
Sixth Street Growth, Sixth Street’s growth investing strategy, made an over $140 million investment in Chronograph in June. Based in New York, Chronograph is a provider of portfolio monitoring, valuations, and analytics technology for institutional private capital limited partners and general partners.
In an April deal, FTV Capital made a significant growth investment in Valitana, a provider of analytics, workflow and portfolio management solutions for structured credit professionals. The investment will help the company accelerate product innovation, advance its AI roadmap and expand within structured credit and into adjacent markets, including CMBS, ABS and ABL.
That’s it for me. If you have any questions, thoughts, or want to chat about deals in the tech, consumer or sports sectors, please email me at rafael.c@pei.group.
Tomorrow, Craig McGlashan will write the Europe edition of the Wire, while Obey Martin Manayiti will be with you for the US edition.
Cheers,
Rafael
