The dearth of progress capital in Europe is such a persisting situation that some early-stage companies have taken the matter into their very own fingers. London-headquartered agency Notion Capital is one in every of them.
In 2017, Notion Capital was one of many first in Europe to shut an alternatives fund to supply its portfolio firms with follow-on capital. Now, it has closed a $130 million progress fund, practically twice the dimensions of its earlier one, that can even make investments outdoors of its portfolio, TechCrunch discovered completely.
U.S. VCs that used to fill the expansion capital hole at present are likely to focus extra on their very own market, stated managing associate Stephen Chandler, noting that “opens up a possibility for European companies like ourselves to make up a few of that distinction and be actual European champions.”
A few of the European firms Notion intends to “champion” from its new Progress Opps III fund are tied to the rising demand for extra sovereignty, together with these specializing in protection and provide chain logistics. However like many, the VC agency can also be drawn to AI, which Chandler sees as an excellent cycle inflicting “a profound shift in the best way that software program is delivered and consumed.”
Notion Capital received’t put money into the infrastructure layer equivalent to massive language fashions. As an alternative, the agency sees alternatives within the utility layer that can “massively enhance” the dimensions of its market, Chandler stated. Whereas Notion’s flagship fund has traditionally been recognized for its robust penchant for SaaS, cloud, and fintech, these will now be AI-infused, and joined by new verticals.
The agency expects to make a dozen investments and has already began deploying its capital from the funds. Offers, to this point, embrace Upvest, a inventory buying and selling API out of its early-stage portfolio, in addition to exterior firms Octopus Vitality spinoff Kraken, and Nelly, a startup that builds software program and monetary merchandise for the medical sector, in keeping with Notion Capital.
To offer itself some “sturdy objectivity,” in Chandler’s phrases, follow-on offers shall be performed by devoted progress fund companions who can even “exit and supply progress stage alternatives outdoors of the portfolio.”
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Considered one of them is current Notion Capital associate Stephanie Opdam (on the left of the image). She is going to now drive this progress technique alongside Jessica “Jess” Bartos, previously a principal at Salesforce Ventures. A U.S. nationwide, Bartos can also be Notion Capital’s first exterior associate rent (earlier companions have been promoted internally.)
“As a result of this was a brand new technique, we felt we may gain advantage from exterior experience at that progress stage,” Chandler stated.
Subsequent progress funds can also be simpler to boost. Whereas Europe has suffered from an absence of pension funds investing in enterprise capital companies, incentives have began to alter in a number of nations, together with France with the Tibi initiative and the U.Okay. with the Mansion Home Accord.
Regardless of its British roots, Notion Capital isn’t solely depending on the U.Okay.’s regulatory framework; this newest Progress Opps III fund is denominated in euros and Luxembourg-based.
To boost this new car, which brings its belongings underneath administration to over $1 billion, the agency relied on its current relationships with restricted companions from throughout continental Europe, the U.Okay., MENA and the U.S.
“One thing like 85% of our cash comes from establishments; and inside that, we’re very effectively geographically dispersed,” Chandler stated.
However whereas current initiatives to mobilize long-term institutional capital “[weren’t] actually a function on this fund,” he added, “the indicators are extraordinarily constructive, and that’s nice [for] addressing that basic drawback we began with, when it comes to a number of the gaps in progress capital we’ve in Europe.”
“If this lastly works out and extra LPs take part in progress stage investing, this might translate into extra competitors for Notion Capital. Not less than on the progress stage, the place it’s much less established than on the early stage. Nevertheless, Chandler sees each as a continuum.
“Our actual aggressive benefit on this progress technique is leveraging the attain that we’ve in our early stage technique,” Chandler stated. “Most progress funds don’t have that. They’re on the market attempting to do all of their sourcing on the progress stage as soon as they put their head above the parapet when it comes to scale and momentum.”
In distinction, he stated, Notion Capital has many contact factors with founders through the years, together with via its very energetic platform staff, and is versatile when it comes to its test measurement.
Regardless of its expanded scope, Progress Opps III’s predominant asset arguably stays Notion Capital’s portfolio. The agency has invested in additional than 150 startups since its inception, together with Currencycloud, GoCardless, Mews, Paddle, and Quantum Programs. Whereas some are pre-AI or have been exited, the remaining firms possible embrace future champions — a monitor document that ought to make exterior firms extra keen to take their progress checks, even when progress capital turns into much less scarce in Europe.
