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Two giant fairness funds got here out of the gate this week. So, what offers?
Earlier this yr we coated how Liquidity Group, a growth-stage debt financier, had raised $40M and launched a $250M debt fund for tech firms. Backers included Apollo (personal fairness, and Yahoo! proprietor) and MUFG (a Japanese financial institution).
Liquidity is an fascinating beast. It’s half tech platform and half lender, utilizing its know-how to make selections on deploying debt amenities and different monetary options from $5 million to $100 million. It claims its processes are comparatively quicker than extra conventional approaches.
It additionally runs “Mars Progress Capital Europe” a $250 million debt fund to offer progress financing particularly to late-stage tech firms and mid-market firms.
Now, MUFG and Liquidity are banding collectively to launch 5 non-dilutive (debt) funds beneath Mars. That is the primary fairness fund, powered by the identical know-how referred to above, and can be focused at late/growth-stage firms. Mars Progress Capital, and Dragon Fund itself, are each primarily based in Singapore and the fund is focusing on fairness investments in APAC.
“Dragon Fund I” will make progress fairness investments in personal, mid to late-stage tech and tech-enabled firms, initially specializing in the Asia-Pacific area. Deal sizes will vary from $20 million to $100 million. MUFG can also be extending its capital commitments to MARS Progress Capital’s non-dilutive funds fund from $750M to $1B.
Ridhi Chaudhary, Managing Director and GP Companion of Dragon Fund mentioned in a press release: “With the facility of Liquidity Group’s ML platform, the funding groups will be capable of consider funding alternatives comprehensively and at a quicker tempo.”
In the meantime, this week, Daybreak Capital, certainly one of Europe’s bigger specialist B2B software program VCs, raised $700m to take a position. This transfer was extra vital information for early stage firms.
This comprised of the $620m Daybreak V, geared toward Sequence A and B phases with preliminary investments of $10m to $40m, and sufficient capital for follow-on rounds. Daybreak Alternatives III can be a $80m follow-on fund, later-stage fundaimed at Sequence C stage onwards.
Daybreak has so far invested in Mimecast (previously NASDAQ-listed, taken personal by Permira in a $5.8bn transaction), iZettle (offered to PayPal for $2.2bn money), Tink (bought by Visa for $2.0bn), LeanIX (not too long ago acquired by SAP), and extra not too long ago Collibra, Dataiku and Quantexa, all unicorns.
Haakon Overli, Basic Companion at Daybreak Capital, calls this a “an incredible level within the cycle to be investing and we see the chance in Europe solely rising.”
So what are we to make of the arrival of such funds?
Nicely, listed below are some observations you may prefer to mull over the.
Firstly – and that is what I’m listening to on the personal dinners and drinks occasions amongst VCs in London, for example – late stage capital to bolster pro-IPO firms is coming again.
Frankly, most observers know that the final quarter of this yr goes to be flat. Nonetheless, it would now change into a key advertising interval for late-stage and progress funds to get into firms ready for markets to bounce again in Q1/Q2 of subsequent yr. They usually wish to be in these offers. Therefore Liquidity popping out of the gate with the above. Little doubt there can be others.
Secondly, pure, early-stage VC funds like Daybreak, who’ve a deep bench in deep tech (one may say) are fairly comfortable to be elevating and deploying funds at early stage proper now. It should nonetheless take not less than a number of years for these bets to mature, and with valuations down, early stage VCs with new funds this yr are getting much better offers than those who deployed in 2021 and 2022 (the place giant and painful hangovers stay). Plus, the Generative AI booms will suck up a number of that early stage capital.
These sentiments have been echoed this week at two occasions I attended in London, coincidentally one with and early stage fund, one with a late stage. For instance, right here’s an early stage fund accomplice over drinks: “The market is ok at early stage, particularly in AI. The remainder of this yr for IPOs? Useless. Everyone seems to be ready for subsequent yr.”
In the meantime, the late stage VC dinner was bullish about subsequent yr and even speaking about deploying late/progress capital to prep their portfolio for M&A and IPO. A typical phrase went one thing like ‘we’re prepping to assist our firms do M&A on this yr, and trying to 2nd Quarter subsequent for the markets to come back again.’
So there you could have not less than some rationalization as to why these bigger funds are showing in what, outwardly, seems to be a down/flat marketplace for startups proper now.
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