German VC firm HV Capital has closed its ninth fund, with a close of €700m — its biggest ever. The fund will be split into early-stage and growth pots. That means it can back companies from seed to Series C.
HV Capital is a household name in German tech. It’s been investing for over 20 years and has backed success stories such as Zalando, HelloFresh, Delivery Hero and Depop.
You’d think a firm of this vintage would have a pretty easy time fundraising, but HV Capital wasn’t left unscathed by economic turbulence brought about by war, rising interest rates and then a banking crisis to top it all off.
“I wouldn’t say it was an uphill battle, because we can play on our strong LP base, but it was definitely more challenging than we anticipated,” says Rainer Märkle, general partner at the firm.
Doubling down on growth
HV’s last fund, of €535m, was similarly split into early-stage and growth functions. The 30% increase in fund size comes largely because the VC saw “significant potential” in later-stage investing and wanted to expand its growth fund, says Märkle.
In fund eight, the early-stage vehicle had €355m in it while the growth pot had €180m. In fund nine, the two vehicles are equally split.
Märkle says that while growth financing “has almost completely dried up”, there are still “amazing opportunities” to be found over the next two years — if you’re an investor that doesn’t follow the crowd.
“Everyone always thinks that VC is a very fast, overnight business with quick flips left and right. But you have to be careful not to adapt too quickly to every new trend that's coming up… but keep the bigger picture in mind,” he adds.
Dive into VC and meet the people holding the purse strings.
While HV is a generalist investor, it's focusing on sectors such as fintech, B2B marketplaces, enterprise SaaS, mobility, blockchain and sustainability.
Details of the funds
- With the early-stage fund, HV Capital plans to make 30-40 investments in companies from seed to series A. Ticket sizes range between €500k-5m.
- With the growth-stage fund, it plans to make 10-15 investments in companies up to Series C. Entry tickets range between €10-60m.
- 75% of the early-stage fund and 25% of the growth fund are reserved for follow-ons.
- 60-70% of the deals will be done in the DACH region, and the rest will be in Europe.
Greater ESG focus
HV’s ninth fund is an Article 8 fund under the European Union’s Sustainable Finance Disclosure Regulation (SFDR) criteria, which means it has adopted specific commitments on improving sustainability and diversity across its portfolio.
30% of its investments will be in climate tech and sustainability. Two of the four companies it has invested in so far are climate techs: ecoplanet, a solution for SMEs to manage their energy consumption, and Agreena, a soil carbon tool for farmers.
It’s also helping its companies hire more female executives — its initial goal is for portfolio C-suites to be 33% female by the end of the fund.
HV Capital says it’s working with its portfolio companies to “push diverse hiring” and is recommending executive search firms committed to diversity. It plans to collect data on at least a quarterly basis to track its progress.
This comes from a fund that doesn’t yet have a female partner — but HV Capital says it's working on it.
“HV has a long tradition of promoting internally, so we see by hiring strong female investors like Zuzanna Czapinska who was just recently promoted to investment manager, we’re taking the right steps to nurture our own talent,” says partner Jan Miczaika. “It’s just not something which happens overnight.”