As reported by Tech Crunch,
Highland Europe — the tech growth fund best known for backing high profile late-stage startups like GetYourGuide, Huel, WeTransfer, Wolt and Zwift — has closed its fourth fund, raising €700M in a comparatively short space of time compared to previous fund closes. Highland plans to ‘double-down’ on its strategy of being one of the few tech-focused growth funds honing in exclusively on tech startups, a sector of the financing world which in Europe, still to this day, is underserved.
The fund has also strengthened its team with the promotion of Jean Tardy-Joubert, Gajan Rajanathan and Ronan Shally to Partner. Tardy-Joubert and Rajanathan joined Highland in 2017/18 from Qatalyst, the San Francisco-based boutique investment bank serving the global tech sector, while Shally has been with the firm since 2014 and is Highland’s Chief Financial Officer.
The new fund means Highland Europe’s assets under management have risen to €1.8bn.
Over the past 12 months, the firm has backed seven founding teams, investing nearly €200M in Alkemics, Cobalt, DominoDatalab, Farewill, Meditopia (the ‘Calm for the Middle East’), Modulr and Supermetrics as well as the existing portfolio.
Highland Europe’s portfolio companies attracted external investment, with €730M follow-on investment in the last 12 months, some of which fueled seven M&A transactions completed by portfolio companies.
The firm said it had also helped the founding teams behind Spot and Smartly.io to navigate strategic and private equity interest, resulting in “substantial liquidity events,” it said.
Fergal Mullen, co-founder and partner at Highland Europe, said in a statement: “During 2020 we have seen 10-year trends in tech adoption compressed into one year across both consumer and business segments. Software has gone mainstream and it is mission-critical. The opportunity at the growth stage in Europe has never been more evident or more urgent.”
The lack of growth funds in Europe is stark when you look at the data. Figures from Dealroom.co show that European companies raised 38% of global venture capital at Seed, but this figure dropped to 21% at Series B and 14% at Series C (rounds of €40-100M). According to one estimate, just one in eight European companies reaches scale, compared with one in four in America, suggesting that European firms are starved of funding at the growth stage.
Speaking exclusively to TechCrunch, Mullen said: “We raised this fund in record time. We started raising on July, 26 and we finished on September 24. So it was very, very quick. We have an extraordinary group of investors. They didn’t just come back, they came back with substantially more capital.
“We’re delivering good returns, and we’re sticking to our strategy. We make commitments on what we’re going to do, we don’t deviate, we’re very focused, and our investors like that. We don’t go down to early stage, we don’t jump up into PE deals and we don’t jump off into things outside pure tech. They know what they’re backing and that’s what they get and the returns are there. The fund is in profit, meaning, they’ve already received back well over more than the capital that they contributed. And there’s still 12 active companies in that portfolio, so there’s a lot of value still to come.”
Mullen pointed out that GetYourGuide, a portfolio company hit hard by the destruction of the travel market during the pandemic had stepped up to the challenge: “They probably got hit the hardest light of anybody. So imagine last year, you’re cruising towards well over a billion euro, a billion of bookings for the year. And you move from that, in a two week period to zero. Right? And when I say zero like I mean zero, rock bottom. And worse than that, bookings that already have been made for the future, months, disappeared. But they survived because, for one, they had a lot of cash on hand from the big fundraise last year. Number two, they made sacrifices early that were initiated by the founding team.”
“And when I say sacrifices: imagine a group of founders taking 50% pay cuts across the board. They asked people if they were willing to participate in a ‘salary cut for equity’ programme. They expected 50 people to maybe put their hands up. They had 157 people take a 30% pay cut. And in return, they get over compensated in new equity. All this added up to the point where instead of having hundreds of millions of revenue in the year, they had, you know, 40 or something like that. But will still end up the year with the same cash year-end. And then on top, we put another 15 million on top. So they’re now in a better place. Once things pick up I think in the spring, summer period, they’re ready to accelerate and really get on with it. It’s a fantastic story and it deserves a mention,” said Mullen.
Highland’s 2020 investment highlights:
* ContentSquare – $190m Series D with participation from Highland Europe
* Featurespace – £30m with participation from Highland Europe
* Zwift – $300m with participation from Highland Europe
* Modulrfinance – £18.9m Series B led by Highland Europe
* Wolt – €100m follow on Series D co-led by Highland Europe
* Domino Data Labs – $43m Series E co-led by Highland Europe
* Alkemics – €21m Series C led by Highland Europe
* Meditopia- $15m Series A led by Highland Europe
* Farewill- £20m Series B led by Highland Europe
* CobaltAI- $29m Series B led by Highland Europe
* Supermetrics – €40m Series B led by Highland Europe
* Contentsquare, Wolt, & Zwift raised €100m+