Highland Capital Partners Europe is perhaps best known for investments including Matchesfashion.com (London), GetYourGuide (Berlin), NewVoiceMedia (London), TalentSoft (Paris), Outfittery (Berlin), Wooga (Berlin) and AMCS (Limerick). It’s now announced it’s closed a sizeable Europe Tech Growth fund of €250 million, with nine investments since first close. This is a significant move in the European venture and growth equity investment market, given that tech companies often find it hard to secure the very large rounds of funding typical in Silicon Valley. This is on trend for some – last year Atomico raised $476 million for growth stage companies outside Silicon Valley.
This is the first independent Europe focused fund for Highland, a Boston and Silicon Valley based firm that was founded in 1988 and is currently investing from its ninth fund.
The Highland Europe team which includes partners, Fergal Mullen, Laurence Garrett, Irena Goldenberg, Sam Brooks, and Tony Zappala, plans now to pursue a growth equity strategy in the tech market with a particular emphasis on internet and software.
While the early-stage market is relatively well funded and has a number of pan-European and regional investors, the growth segment in Europe is quite sparse and includes just a handful of firms. So €250 million to invest in high-growth tech companies will add significantly to the growth equity end of the market.
To date, European entrepreneurs tend to have to settle for under-funded, over-syndicated and therefore less than ideal shareholder structures.
Instead, Highland Europe is exclusively focused on tech companies in Europe and Israel that have achieved a reasonable scale, typically tens of millions of revenue, and are demonstrating growth. In other words, they look at profitable business models or ones that look like they will become profitable. This often means boot-strapped, ‘capitally efficient’ companies that tend not to raises “A, B, C” rounds, but instead heads towards profitability, but then do a big growth funding round much later.
That may be a company on a Series F, with only some small rounds prior to that, but with revenues.
Mullen, a veteran of Highland Capital Partners in the US, launched the European business in 2007 with his colleague Irena Goldenberg and together they invested in companies like Photobox, myOptique, Spartoo, Privalia, and Wooga. Mullen was also a significant investor in the European business VistaPrint which IPO’d on the NASDAQ in 2005 and has done very well.
These five companies had combined revenues of over $1.2B this year. Most are profitable, some significantly so. Mullen won’t comment on the potential exits but says he is “bullish”. It’s made eight investments since July 2012. A ninth investment is planned soon.
Highland has offices in Silicon Valley, Boston, Shanghai, Geneva, London, and Dublin.