Venture Capital/News/

Wolt and Einride-backer EQT Ventures closes €1bn fund for early-stage startups

It’s the largest early-stage fund raised by a European VC

By Eleanor Warnock

The EQT Ventures team

EQT Ventures, the VC arm of publicly listed Swedish investment manager EQT Group, has just raised a €1.1bn third fund to back early-stage startups. It’s the largest fund raised by a European VC focused purely on early-stage venture, and follows EQT Growth’s €2.4bn fund announced in September

Where will the money go?

  • The firm has already led investments in 13 companies with this fund, including fintech Juni and consumer hardware maker Nothing
  • EQT Ventures says it’ll make investments of between €1m and €50m into early-stage startups in Europe and North America. The average ticket will be about €10m, partner Lars Jörnow says.
  • In addition to the usual software and consumer bets, the generalist fund wants to back companies tackling big, global challenges. Those challenges are different from the challenges that faced us when EQT Ventures launched in 2016, Jörnow says. “We’re seeing a lot more ambitious founders starting companies in climate tech,” he says, adding that foodtech and the creator economy are also growing areas of interest for entrepreneurs. 

What is EQT Ventures’ track record?

  • EQT Ventures has made more than 100 investments since its launch in 2016 and raised a total of €2.3bn, including this new fund. 
  • It also leverages its internal AI tool, Motherbrain, to find companies. To date, it’s helped the team source 15 investments. 
  • Jörnow says that out of the 50 companies backed by the firm’s first fund, 18 have already exited. “On the relative spectrum of VC funds, I think we were fortunate enough to do quite a few exits at the very peak of the market.” Recent EQT Ventures portfolio company exits include the acquisition of AI-voice platform Sonantic by Spotify in June and employee insights startup Peakon’s sale to Workday last year. 

What’s is EQT Ventures’ view on backing traditionally underrepresented founders?

  • Jörnow says that the firm has certain internal goals about meeting and “having deeper discussions” with diverse teams, and is working on building out a scout network to “access pockets of founder networks that have historically not been as well connected”.
  • EQT Ventures’s six-person investment committee (IC) is also half male and half female, and there is an equal gender split at the partner level. “We believe that the inputs will dictate the outcomes.” 
  • The firm does not have an external list of the diversity breakdown of its portfolio, but says it’s aware that it is not as diverse as the management and IC. 

What kind of investors has EQT raised money from?

  • Jörnow says that compared to 2019, when EQT Ventures closed a €660m early-stage fund, there were more questions this time around from LPs — limited partners, or the investors in VC funds — about the macroeconomic environment, inflation and turmoil in public markets.
  • The fund is backed by institutional investors, foundations and endowments from Europe, North America and Asia. 

How will EQT Ventures make money with this fund?

  • Early-stage European investors are raising larger and larger funds. Given the small size of the tickets, how do they plan on making returns that make their LPs happy? 
  • Jörnow says that the firm is looking to secure big returns by focusing on “founders that are solving the biggest problems”. In other words, “the $10bn+ potential outcomes, which is very, very difficult”. 
  • He also adds that EQT Ventures likes to be able to offer to invest the entirety of a round amount. That means founders don’t need to find other investors to complete a round, and lets EQT Ventures get a higher ownership stake. 
  • Finally, he says EQT Ventures focuses on follow-on rounds too. He gives the example of food delivery platform Wolt, which gave EQT Ventures a 200x uplift on its 2016 investment when it was purchased by DoorDash last year. After leading the €7m Series A, the fund put in roughly another €28m over subsequent rounds, making the firm the largest shareholder when it was acquired. 

Sifted’s take

European VCs are continuing to raise even in times of macroeconomic uncertainty, and have been raising larger and larger funds — transatlantic VC firm Index Ventures announced a $900m fund this summer for Series A and B companies and Northzone announced a €1bn stage-agnostic fund in September

It’s a vote of confidence for the ecosystem, especially from top tier LPs outside of Europe. But bigger funds mean bigger hurdles to returning them, especially when initial tickets are small. Typically, VCs tell their LPs they will return them three times their money, a goal that will mean backing not just one, but many unicorns. 

Eleanor Warnock is Sifted’s deputy editor and cohost of The Sifted Podcast, and writes Up Round, a weekly newsletter on VC. She tweets from @misssaxbys 

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