French funding group Eurazeo has closed a brand new development fund value greater than €1.6bn, one other indication of the rising energy and maturity of Europe’s development fairness market.
The fund is Eurazeo’s third development automobile for the reason that agency began a development technique in 2014. The expansion crew invests in firms from Sequence C onwards with preliminary investments of €25-100m and the potential for comply with on. Many of the investments are in Europe within the areas of B2B SaaS, digital well being, cybersecurity, infrastructure software program, fintech and marketplaces.
The agency’s €1bn development portfolio consists of European unicorns equivalent to digital healthtech Doctolib and Spanish supply firm Glovo.
As Europe creates extra tech successes equivalent to Adyen and Spotify, skilled founders and operators are aiming to remain personal longer as they develop their enterprise, fueling demand for traders who can preserve plugging capital into their companies on the later levels. Europe has seen some giant development funds not too long ago together with Index’s $2bn fund introduced yesterday, which it would use to put money into companies all the way in which as much as IPO.
“As a substitute of looking for a strategy to exit, discover a purchaser or attain profitability, [European tech companies] are deciding to lift more cash from traders to take a position extra within the enterprise, develop, launch new merchandise and develop in new geographies. Not all of them need to be international however all of them need to be a really massive enterprise in an unlimited territory,” says Yann du Rusquec, accomplice at Eurazeo Progress.
“There has clearly been a change within the ambition of entrepreneurs.”
He added that the agency had already deployed greater than half of the fund.
Eurazeo is one in every of a small group of publicly-traded European personal fairness and VC companies that features Bridgepoint, EQT, Companions Group, Ahead Companions and Draper Esprit. The corporate manages €15bn in personal fairness belongings throughout buyout, enterprise and development methods.
Subsequent steps for European development fairness
The Eurazeo development crew has already seen a number of excessive profile exits, together with Farfetch; it bought all of its shares within the on-line trend market in 2020, netting €90.4m, equal to 4.1x return cash-on-cash on the unique funding.
One other Eurazeo development portfolio firm, Swedish fintech Tink, introduced an settlement for €1.8bn acquisition by Visa in June, only a half yr after Eurzeo had invested. If accomplished, the deal could be the third-largest acquisition of a European VC-backed fintech.
Du Rusquec says that European “development fairness just isn’t a mature market” and that extra exits and IPOs from European startups will assist take the continent’s development fairness to the subsequent degree, on par with the US.
There may be already a robust pipeline of European tech firms seeking to record, although many profitable European tech firms have chosen to record within the US, equivalent to UK-based healthtech large Babylon (by way of a SPAC) and UiPath. Du Rusquec says that traders have to tempt European firms with sturdy European footprints to go public within the area.
“Once they have the selection [between the US or Europe], we simply have to persuade them that they’ll get the identical valuation and the identical high-quality traders by being listed in Europe. That’s what we’ve got to construct within the coming years,” he says.
Authorities help for Europe’s tech ecosystem
Du Rusquec and Benoist Grossmann, managing accomplice for enterprise and development, say they’re additionally grateful for governments and public funds supportive of the area’s ecosystem, together with France.
“We’re extraordinarily fortunate to have a authorities which has given us plenty of tailwinds,” says Grossmann, who can also be chairman of France Digitale, which represents the nation’s entrepreneurs and VCs.
LPs in Eurazeo’s most up-to-date development fund embody public capital from the European Funding Fund, British Affected person Capital and France’s public funding arm Bpifrance.
European policymakers have “realised that we’ve got to construct a tech economic system in any other case it’s going to be very arduous for us to compete at a worldwide degree and make ourselves understood by the biggest tech firms within the US and Asia,” says Du Rusquec.