The aim of Highland Europe’s newly launched €700m investment fund can be summarised in three words, says Fergal Mullen, cofounder of the firm: “tech, growth and Europe.”
The fund is the firm’s fourth in eight years and this one took just two months to close, sourcing investment largely from existing investors — pension funds, university endowments and large family offices.
Previous funds have backed companies like Huel, WeTransfer and GetYourGuide and this one will be used to write cheques between €10 and €70m.
Although focused broadly on European tech, Mullen says the firm isn’t looking to speculate on trends, simply to back fast growing companies.
“We don’t predict which sectors will be hot, we want growing companies and compelling teams,” he says. “We invest in both consumer facing tech, particularly ecommerce, and also B2B tech, particularly SaaS.”
Like other funds, Mullen anticipates that 25% of this one will go to the UK and Ireland, 25% to Germany, 25% to France and 25% to the rest of Europe.
The firm has investors based in both London and Geneva, and has made past investments across the continent.
This year, for example, the firm’s backed eleven companies, including leading a €100m Series D round in Finnish food delivery company Wolt and backing companies like British affordable funeral provider Farewill and data startups Supermetrics and Domino Data Labs.
Europe’s funding gap
A primary aim of the new fund is to fill the gap Highland Europe’s partners perceive in the available later stage funding provision for European tech startups.
“Europe has always had less capital than the US,” says Mullen, “the US market has always been a bit overcapitalised whilst we’ve been under.”
Whilst European funding tends to match the levels seen in Asia and the US at Seed and Series A level, the European numbers drop significantly at Series B level onwards.
“Earlier stage companies have a lot of options but when you want to raise €30m, €40m, €50m or €100m, your European options are extremely limited,” Mullen says.
“We’re happy to write a cheque from €10-70m, our average is €30m. If we like someone we have the conviction to write the cheque on our own, we don’t need to go into it with someone else.”
Coronavirus has spurred on the development of European tech, and SaaS in particular, Mullen says, leaving a lot of companies in need of proper late stage backing.
“Highland Europe’s role is to bring capital, our deep network and scaling expertise to companies that can make it all the way to IPO,” he says.
