Australia-based private equity firm Potentia Capital has reached a first close for its third technology buyout fund, according to four sources familiar with the situation.

The first source said the first close amounts to more than AUD 500m (USD 327m), including the GP commitment. The second source put it at about AUD 450m, but did not specify whether this included the GP commitment.

The fund launched in May with a target of AUD 750m, this news service previously reported. The same report noted that the Fund III GP commitment would be of similar magnitude to the 10.5% seen in Fund II.

The first close happened during the week of 8 September, the first and third sources added. According to the third source, approximately 20% of the capital raised to date comes from international LPs, including new and existing Japanese investors. Potentia made its debut investment in Japan last year, teaming up with Tokyo-based J-Star to acquire HR software provider Jinjer.

Fund II reached a first and final close of AUD 670m against a target of AUD 500m in 2022 after about four months in the market. LPs included HarbourVest Partners, Vantage Asset Management, Cbus, MLC, Aware Super, New Zealand insurer ACC, and US-based Franklin Park, among others.

Fund I closed on AUD 458m in 2021 with backing from MLC, Aware Super, ACC, and Franklin Park. Its key exits include software providers Ascender and CompliSpace, which delivered 16.4x and 4.7x returns, respectively, following sales to global strategic buyers in 2021.

Fund I has achieved at least five exits to date. They also include mining software provider Micromine, which was sold to UK-based Wei Group in a GBP 657m (USD 891m) deal earlier this year. The fund had generated distributions to paid-in (DPI) of 3x as of May.

Potentia invests in B2B software or technology-enabled services companies with revenue of AUD 10m-AUD 150m. Australia and New Zealand are the core geographies, although pathways for investees to grow into Asia are desirable. Up to 25% of the new fund could be invested outside of Australasia, especially in Japan, this news service previously reported.

Potential was established by Andrew Gray, formerly of Francisco Partners and ex-MYOB CEO Tim Reed in 2016 to fill a perceived mid-market technology funding gap. Most of the investment in this space had historically been provided by foreign firms.

Portfolio companies tend to be active outside of Australia and New Zealand, primarily in the US, UK, and Europe. There have been at least two acquisitions in Japan – including Jinjer and payroll software company Workcloud, which was a bolt-on for Ascender in 2017.

“There are certain sectors where you need to have specialists, and technology is one. You can’t have someone who does retail and other things doing technology – especially somewhere like Australia,” one of Potentia’s LPs told AVCJ earlier this year.

“You’re not building an Australia business because Australia is not big enough to sustain anything. You’ve got great engineering talent, but you need outreach for the global market. That’s why you need someone with specialization to build and to get recognition.”

Potentia declined to comment.