HV Capital hits €710M close on Europe VC fund amid tough market

Germany-based HV Capital has reached a €710 million (about $784 million) close for its latest fund targeting European technology startups, defying a broader slump in VC fundraising.

Fund IX will target startups across all stages and is the firm's largest vehicle yet—33% bigger than its predecessor, which launched in 2020 with €535 million. It's also the third-largest European VC fund to close this year, following a tough period for European VC fundraising.

"Fundraising took longer than expected and was not as easy as we had anticipated when we started a year ago," said Jan Miczaika, a partner at HV Capital. "We're very proud that many of our existing LPs re-committed, and that we were also able to win over new LPs that allowed us to raise the fund."

According to PitchBook's Q1 2023 European Venture Report , VC funds in Europe raised only €3.4 billion in the first three months of this year. While annual fundraising surpassed €20 billion in each of the previous four years, 2022 is currently on pace for the lowest annual total since 2015.

This latest fund will be split into two vehicles—Fund IX Venture and Fund IX Growth—and will target tech startups with initial ticket sizes of €500,000 to €60 million. Miczaika explained that the structure allows LPs to select how much capital to deploy into each strategy. HV Capital's previous investments include German online retailer Zalando , takeaway app Delivery Hero , UK fintech SumUp and recipe box startup HelloFresh .

The new fund has already made four investments. Among them are Berlin-based engineering intelligence platform Spread, SaaS company Polyteia , Munich-based energy management platform Ecoplanet and Danish carbon credits startup Agreena . However, Miczaika recognized that a tougher deal environment is expected in 2023, noting that early-stage rounds are likely to be smaller than they previously were—with valuations correspondingly lower. Nevertheless, competition remains for the most interesting deals.

"For our growth team, the picture is a little bit different," he added. "There are fewer deals happening currently but that also means more opportunities. What we are doing is taking a very active approach going through our portfolio but especially through other fund portfolios to find interesting investment opportunities."

The vehicle is also HV Capital's first fund under EU sustainable investing regulations requiring investors to meet certain ESG criteria. The firm said it is targeting 33% female representation in C-Suite positions across its portfolio. It also aims to have 30% of the funds allocated to companies in line with the Climate Action and Environmental Sustainability criteria set out by the European Investment Fund, one of its LPs.

Featured image by VAKS-Stock Agency/Shutterstock

This article originally appeared on PitchBook News