PSG Equity Closes Third European Fund at 4.4 Billion Euros

Growth investor PSG Equity has closed its third European fund with capital commitments totaling more than 4.4 billion euros. PSG Europe III has thus reached its target hard cap and is significantly larger than its predecessor. PSG Europe II had closed in October 2023 at €2.6 billion. With the new fund, PSG aims in particular to support European software and technology companies in their international growth. A key focus is on AI-native companies as well as established software providers that integrate artificial intelligence into their products.

Fund grows from 2.6 to more than 4.4 billion euros

For PSG, the fund’s closing represents a significant expansion of the capital available for Europe. Compared to the previous fund, the volume has increased by at least 1.8 billion euros, or just under 70 percent.

According to the investment firm, the fund saw strong demand from both existing and new investors and reached its hard cap.

Investors include government pension funds, sovereign wealth funds, insurance companies, family offices, and high-net-worth individual investors. PSG does not name individual limited partners in the announcement.

PSG Equity was founded in 2014 and specializes in growth equity investments in software companies and technology-enabled service providers.

AI Takes Center Stage

PSG Europe III continues the firm’s existing European investment strategy. The fund is seeking software and technology companies that can develop into Europe-wide market leaders and subsequently expand internationally.

Artificial intelligence is playing an increasingly important role in this regard. PSG aims to invest in companies whose business models are based on AI from the outset, as well as to support established software providers in integrating AI into existing products and processes.

The firm’s recent European investments include Mistral AI, BrightAnalytics, Aikido Security, Quality Hosting, Emotion Mobility, Namirial, and Glasswall, among others.

PSG views the increasing use of AI, the demand for European technology providers, and the debate surrounding digital sovereignty as key drivers of the European software market.

43 Platform Investments in Europe

PSG has been building its own European organization since 2019. The company now employs 83 people in Europe with expertise in investment, software operations, and technology. The team operates out of London and Paris.

According to its own figures, PSG has made 43 platform investments in Europe to date. In addition, there have been 98 add-on acquisitions with operations in 24 European cities.

Twelve so-called “realization events” have been recorded to date. Recent exits include Sellsy, Signaturit, N2F, Artur’in, Hornetsecurity, and Mapal.

This approach also demonstrates that PSG does not exclusively provide capital for organic growth. Through acquisitions, portfolio companies are also expected to consolidate markets and expand their geographic reach.

European Software Champions as Targets

With the new fund, PSG aims in particular to support companies that can build a leading position in Europe starting from their home markets.

Dany Rammal, Managing Director and Head of Europe at PSG, also sees the growing importance of digital sovereignty as an opportunity. European customers are increasingly seeking out trustworthy technology providers, he notes. This could give rise to new software companies with international competitiveness.

In addition to capital, PSG provides its portfolio companies with operational resources and technology expertise to support this.

A Multi-Billion-Euro Fund Meets Europe’s AI Growth Phase

With more than 4.4 billion euros, PSG now has significantly more capital at its disposal for its European strategy than its predecessor fund did. This also underscores how strongly major growth investors are preparing for the next stage of development for European software and AI companies.

The key question will be whether Europe can actually produce more independent technology providers—in addition to successful early-stage companies—that can scale internationally even in later growth phases.

This is precisely where PSG Europe III comes in: The fund is not primarily intended to finance companies during their startup phase, but rather to provide them with capital and operational support for expansion, acquisitions, and the establishment of stronger European market positions.