French investment group Eurazeo has announced the third and final closing of its second smart city fund at €400m. Its first was an early backer of top European startups including Glovo and Forsee Power.
The new fund is supported by five sovereign wealth and development institutions — the European Investment Fund, Bpifrance, PFR, FRC and the Korean Venture Investment Corporation — as well as corporations and family offices across Europe and Asia.
Eurazeo’s international background is what appealed to many investors, says the group’s investment manager Pierre Devillard. “We have LPs and teams spread around the world, mostly in Asia and Europe,” he tells Sifted. “This means we really have the ability to accompany companies as they scale internationally.”
Where will the money go?
Smart City Fund II will invest in high-growth companies operating in sectors that underpin the transition towards more sustainable cities, from renewable energy to the built environment through mobility, logistics and manufacturing.
It will invest primarily in Europe but also in Asia, Israel and North America and prioritise companies with “verifiable” environmental impact.
Devillard explains that this means that the carbon impact of portfolio companies will be measured, either by how much carbon they're saving or how much carbon they're removing. Operational KPIs and five-year objectives will be implemented when Eurazeo invests and yearly monitoring will be carried out.
“This is part of these companies’ DNA,” says Devillard. “Their economic growth will come with the growth of their carbon-saving or carbon-capture solutions.”
The fund will back startups at all stages of their lifecycle, says Devillard, with tickets ranging from €3m-40m. It also isn’t afraid of backing businesses with an infrastructure component. “As a thematic fund, we are stage-agnostic from early to late stage and business model agnostic,” he says. “We are happy to back not only digital companies but also innovative companies with operations, assets or factories.”
Eurazeo plans to do 20 to 25 deals from the fund over the next four years.
Eurazeo’s ESG push
Fund II has already invested in a number of smart city startups including Germany’s 1Komma5, which builds carbon-neutral energy systems, French rapid urban EV charging company Electra and peer-to-peer renewable energy platform Urban Chain, which is based in the UK.
Its first smart city fund, raised in 2016, has seen five companies exit through public listings or acquisitions: Volta Charging, Bird, Forsee Power, Glovo (acquired by Delivery Hero) and Grab.
Fund I and Fund II are part of the group’s venture strategy, which currently holds €3.4bn in assets under management (AUM). The Paris-based investor, however, is also active in other fields including buyout and growth, which AUM total €34.8bn.
Eurazeo has also developed a number of other initiatives to support climate investments as part of its intention to incorporate ESG into its business model. They include Eurazeo Sustainable Maritime Fund, launched in 2021, and Eurazeo Transition Infrastructure Fund, which recently closed at €420m.