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You’re receiving Dealmaker for free. Upgrade to a paid subscription to access all of our award-winning tech and business journalism. Subscribe to The Information here for 25% off your first year (normally $399). Welcome back! The U.S. should start a sovereign wealth fund and maybe it should invest in TikTok, President Trump suggested earlier this week. Well, maybe. But if the fund ever does come to life, its money would be arguably better spent on a bigger, more speculative investment: Stargate, the $500 billion OpenAI-SoftBank-Oracle data center expansion that Trump announced last month. Plans for both the sovereign wealth fund and Stargate are hazy and easy to dismiss, particularly in a dizzying two weeks of White House orders and other chaos. But tying the two initiatives together could work. The buildout of data centers for artificial intelligence has clear national importance, but will be difficult to finance using only free-market dollars. What does Stargate look like, as it stands? We reported last month that four Stargate general partners—OpenAI, SoftBank, Oracle and Emirati sovereign wealth fund MGX—would commit about $45 billion in equity to the project, which will build data centers for OpenAI. The project will likely need to at least double that amount of equity to help attract hundreds of billions of dollars in loans for the phased buildout of the data centers. A U.S. sovereign wealth fund, in theory, eventually could help fill that equity funding gap. SoftBank seemingly has deep access to capital—thanks to its valuable Arm stake and close ties to Japanese banks—but likely will hit its own funding limits at some point. OpenAI loses billions of dollars a year, while Oracle’s balance sheet is relatively thin. The U.S. may not want a larger portion of funding for Stargate coming from a foreign entity like MGX, even if the UAE is a strategic ally. Venture capitalists say that startups trying to make advances in fields like space exploration, quantum computing, or weapons manufacturing also could make logical investment targets for such a sovereign wealth fund. Theo Osborne, a managing partner at the late-stage venture capital firm 9Yards Capital, an investor in defense startup Anduril, said: “These companies just need a ton of money. It’s a lot of [research and development] dollars going into the ground, and the financial returns in the time period that VCs need aren’t always there.” He added that such firms often can’t raise money from foreign sovereign wealth funds because of foreign investment rules. “That’s where a U.S. sovereign wealth fund could come into play.” Of course, the free-market history of the country has long discouraged presidential administrations from carrying out so-called industrial policy, where the government invests in the private sector, in effect picking winners. Another factor is that the U.S. doesn’t need a sovereign wealth fund: It has no shortage of capital, both domestic and global. (Many economists would argue that the best use of government cash is to cut the growing budget deficit.) Still, the U.S. has been inching towards creating a sovereign wealth fund for years, and has several piles of cash that look surprisingly like sovereign wealth funds. In the Biden administration alone, hundreds of billions of dollars was appropriated for things like infrastructure, chips and climate. The logic has been to use government money to spur private investment, and to fund areas that are seen as crucial for national security or economic competitiveness. The risk is that private capital was not funding these projects because they didn’t make economic sense, putting the government at risk of losing money. As for Trump’s idea about investing in TikTok: the Chinese-owned app doesn’t really fit this criteria. The problem is not a shortage of investors—it's whether TikTok’s owner actually wants to sell. The IPO dam may be showing cracks, much to the joy of private equity and venture capital investors. SailPoint, an identity security software company owned by private equity shop Thoma Bravo, started making official rounds with investors for its initial public offering today—an important tone-setter for the tech IPO market for the year. SailPoint could represent a nice return for Thoma Bravo—the software buyout giant took Sailpoint private for nearly $7 billion in 2022, and now is looking to take it public for as much as $11.5 billion, Reuters reported. But the price the company is eyeing looks expensive, at 14 times annual recurring revenue, a multiple that would put it in the top tier of publicly traded software firms. SailPoint has the sales growth to back up some of that swagger, with 30% ARR growth, but it still burned through $250 million in the fiscal year ending January 31, 2024, its filing shows. The deal will be closely watched by other private equity shops looking to unload their holdings into the public markets, as well as venture-backed cybersecurity firms eyeing IPOs like Snyk, 1Password and Netskope. A drought in offerings has put the firms under pressure to return cash to investors. IPO bankers expect PE-backed companies to make up a big chunk of public listings this year, in part because a single owner can call the shots. Increasingly, those PE firms need to show investors returns after a big deals drought. | 
