San Francisco- and Berlin-based VC Headline has raised $865m for its fourth growth fund. It has hired a new team to run the fund, led by incoming general partner Shalini Rao, who will be based in London. “The ambition is definitely to have half of the fund deployed in Europe,” she tells Sifted.
Headline, which also has offices in Hamburg and Paris, has invested in big European startups like OpenAI challenger Mistral, French employee benefits provider Swile and German robotics startup RobCo.
Rao says the new fund will invest in about 25 companies at Series B and above over the standard course of three to four years, writing cheques between $20m and $70m. The growth fund is also partially euro-denominated, according to a US securities filing.
Headline’s new fund was raised in part from big European LPs, including French state bank Bpifrance, German state-backed KfW Capital and the European Investment Fund (EIF) through its European Tech Champions Initiative. The firm says most of the fundraising took place in about a year, although filings show the fund was incorporated back in June of 2022.
Rao is joining Headline from US growth investor TCV, and will lead a team for the new growth fund including investors Nancy Xiao, Trevor Neff, Reda Bensaid and Jake Horwitz, who will work out of San Francisco and Headline’s European offices.
Headline last raised $950m across three early-stage funds in 2022 — with €320m dedicated to investing in European startups at seed and Series A.
Defence, pharma and freight software
Rao is eyeing scaleups in areas like pharma, software and trucking and freight software.
She says she’s thinking about the “regulatory landscape more broadly, and bespoking some of these theses to Europe will be incredibly interesting; one application of that being AI, another being defence, for instance, wherein selling to the [US Department of Defence] is very different than selling to different constituent actors across Europe.”
Defence tech, which has become increasingly popular with investors in recent years, is among the areas Headline is “without a doubt” paying attention to. “It’s been pretty interesting to see what's happened in the US, where defence 2.0 took a little bit of a manifestation of hardware plus software, and that's almost paved the way for a change in the way that contracts are able to be formed with different stakeholders in the US,” she says. “The question is kind of a timing one, I think, in Europe.”
The size of the fund — sub $1bn — was a bonus for Rao. There’s been a “proliferation of mega funds” in recent years (think: Andreessen Horowitz raising $7.2bn or Index Ventures raising $2.3bn this year) and she doesn’t think that’s such a good thing.
"The consequence of that is a need to deploy really large cheques into companies, and sometimes that can result in companies being somewhat over-capitalised or it can manifest in different incentive structures.” Based on what she’s seeing in Europe and the US, “I think the size is compatible with the opportunity.”
Headline isn’t alone in recently committing growth capital to Europe: London-based Balderton Capital announced a combined $1.3bn in two funds to invest strictly in Europe last month; meanwhile a group of former growth investors from French firm Eurazeo are currently looking to raise at least €600m in a new fund to invest in scaleups.
