DN Capital Launches $350M Fund Following Portfolio Success
DN Capital Launches $350 Million Fund Following Strong Portfolio Performance
DN Capital, a highly active venture capital firm in Europe, has announced the launch of its latest $350 million fund. This comes after a successful year for the firm, witnessing four portfolio companies achieve valuations exceeding $1 billion.
Investment Focus and Geographic Scope
“Fund V” will allocate capital across Europe, the United Kingdom, and the United States. However, DN Capital maintains a strong focus on European startups, particularly those originating from Northern, Western, Central, and Eastern Europe, thanks to its predominantly European limited partners.
Leadership and Key Investments
The fund is spearheaded by Nenad Marovac, based in Europe, and Steve Schlenker, based in the U.S. DN Capital notably led the Series A funding round for Auto1, which subsequently went public on the German Stock Exchange with a $10 billion valuation – representing a 150x return on their initial investment.
Prioritizing Entrepreneurial Understanding
As Nenad Marovac stated, the firm dedicates significant time to deeply understanding entrepreneurs, their markets, teams, and products. This thorough assessment occurs well before any financial discussions take place.
Capitalizing on Post-Pandemic Opportunities
Steve Schlenker believes the full societal and behavioral impacts of the pandemic are still unfolding. He emphasizes the emergence of tech founders dedicated to accelerating recovery and addressing the challenges of the post-COVID era.
Recent IPOs and Unicorn Status
In July 2021, MrSpex, a German online eyewear retailer, successfully completed an IPO valued at over $1 billion. DN Capital’s portfolio also includes prominent unicorns such as Remitly, Jobandtalent, and GoStudent.
Fund V: Oversubscribed and Focused
With a 20-year history, the company reported that Fund V was significantly oversubscribed. The fund will concentrate on its core areas of expertise: software, fintech, marketplaces, and the consumer internet.
Europe's Growing Competitiveness
Schlenker highlighted Europe’s increasing competitiveness against the U.S. in terms of investment returns.
Competition from U.S. Venture Capital Firms
Regarding the presence of U.S. VCs in Europe, Schlenker noted collaborations with firms like Sequoia, Lightspeed, and Battery. Competition is particularly intense in the U.K. market, where American firms often prioritize opportunities where English is spoken.
Investment Strategy and Geographic Preference
He explained that U.S. players tend to be more competitive in Series B and C funding rounds in countries like France and Germany. However, DN Capital focuses disproportionately on investments outside the U.K., particularly at the Series A level.
LP Attraction and Fund Performance
Marovac attributed the renewed interest from limited partners to the firm’s strong performance. The Auto1 IPO in February yielded a 3.5x return on Fund III, while the MrSpex IPO delivered a 1x return on Fund II. The firm’s investment in GoStudent, made at a $20 million valuation, saw the company raise funds at a $1.4 billion valuation just a year later.
Navigating Fundraising Challenges
While fundraising was initially progressing “OK,” it wasn’t “gangbusters” before these events. Marovac believes the positive outcomes and shifting investor sentiment in Q1 of the current year significantly improved fundraising efforts.
Portfolio Support During the Pandemic
The fund swiftly responded to the pandemic by assessing its portfolio companies and ensuring they were adequately funded through at least the end of 2021. They then prioritized investments in companies resilient to COVID-19 and poised to benefit from the accelerated digital transformation.
Key Areas of Investment
Marovac cited examples like UiPath and software automation, as well as the growth of digital payments and fintech solutions promoting digital inclusion, with Remitly serving as a prime example.
Future Outlook
With this new $350 million fund, DN Capital is well-positioned to continue supporting and driving growth within Europe’s dynamic startup ecosystem throughout 2021 and beyond.
