German venture firm HV Capital closed a €710 million ($784 million) fund to back European technology startups during an industry slump in which new investment has shriveled.
(Bloomberg) — German venture firm HV Capital closed a €710 million ($784 million) fund to back European technology startups during an industry slump in which new investment has shriveled.
The fund is the Berlin-based firm’s largest ever and its first under new European Union sustainable investing regulations that require investors to meet certain environmental, social and governance criteria, HV Capital said in a statement Thursday.
It comes amid a global technology sector downturn that has hit Europe particularly hard. Funding for European startups fell 57% in the first quarter from a year earlier, while venture capital firms there are on track for their worst year since 2015. Only 22 funds were announced in the region during the period, according to research firm Pitchbook.
The dearth of activity is a “huge opportunity” for the firm even if the investing outlook looks worse than it did a year ago when HV Capital began raising the fund, according to General Partner Rainer Märkle.
“The amount of quality startups is almost the same as the last couple of years, but we have a lot less competition,” Märkle said in an interview.
Read more: European VCs Are on Pace for Worst Fundraising Year Since 2015
About 75% of the fund came from existing backers, primarily institutional investors in Europe and the US, according to Märkle. It is the firm’s first since early in 2022, when HV Capital announced a €430 million fund to hold onto positions in its portfolio companies longer.
An early backer of German consumer businesses like Zalando SE and Delivery Hero SE, HV Capital is now looking primarily into fintech and enterprise software. Märkle said his firm wants to look at “every single deal” that happens in Germany and plans to place as much as 40% of its new fund in projects outside of the country.
None of those investments will go to companies working on cryptocurrency tokens, however. Although HV Capital plans to invest in blockchain technology, Märkle said the firm is ruling out crypto because of a volatile market and tough regulation.
The fund falls under new EU rules meant to encourage green financing, and HV Capital will reserve at least 30% for companies aligned with the climate goals of of the European Investment Fund.
Additionally, HV Capital wants startups it backs to have women compose at least one-third of their executives by the time the fund reaches the end of its life in a decade. Märkle declined to comment on the current gender representation at the fund’s investments and said HV Capital plans to disclose data on climate and diversity starting next year.
–With assistance from Agatha Cantrill.
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