Revolut and Spotify-backer Lakestar has closed $600m (€552m) to invest in European companies in deeptech, AI, healthcare, digitalisation and fintech.
The capital will be split across two funds: with $280m for an early-stage fund for seed and Series A investments and $320m for Series B rounds and above. The early-stage fund is the VC’s fourth, while the growth fund is the firm’s second.
It hasn’t been easy to raise, however, with Lakestar first incorporating the funds three years ago.
Key team members have left since raising the previous fund, including former partner Mathias Haniel. Former managing partner Mika Salmi has stepped down to venture partner.
Lakestar says that its current team size "is ideally suited to manage the funds" it has currently.
A tricky time for fundraising
Lakestar, which has offices in Berlin, Zurich and London, last raised in 2020 when it secured $735m to invest across an early stage and growth stage fund, and the strategy — of backing European founders from seed to post-Series B — is the same this time.
Fundraising conditions are markedly different to 2020, however. Overall it took Lakestar three years to raise the full $600m; both funds were incorporated in 2021, according to SEC filings.
The growth fund was harder to raise than the early-stage fund, says Ninja Struye de Swielande, partner and head of investor relations at Lakestar.
LPs are less willing to part with their cash because the growth market is “a little bit more frothy” driven by “huge drops in valuations”.
I had conversations with LPs in the US that would say, ‘I didn’t even know there were tech companies in Europe.'
And getting LPs from the US to invest in European funds is still a hard sell.
“When you need to fundraise as a European fund, you also position Europe,” says Struye de Swielande. “And unfortunately, in times where there’s scarce capital, positioning Europe as a top tech nation is still very difficult. I had conversations with LPs in the US that would say, ‘I didn’t even know there were tech companies in Europe’.”
“When you have to compete with the best of the best on an international level, it’s quite tough,” she adds.
For VCs on the ground though, she says it’s clear that Europe has talent.
“Whenever I go to the universities, like UnternehmerTUM in Munich, it always makes me proud to see the technical and deeptech expertise coming from there, as well as all the different ecosystems we have across different cities in Europe,” says Struye de Swielande.
“In the US, you have a concentrated pool of capital and ideas and talent, whereas in Europe there’s such a variety and diversity of founders.”
Lakestar declined to specify which new and existing LPs invested in the new funds, but did say that three insurance companies from the UK, Italy and Germany, as well as pension funds and high net worth individuals put money in.
Sifted also found press releases indicating that German family office Koehler Group, which invested in Lakestar’s first growth fund, invested in both the new early stage fund and growth fund, and Polish state-owned fund of funds, PFR Ventures invested in Lakestar’s new growth fund.
Lakestar declined to comment, citing confidentiality reasons.
The portfolio
Lakestar has $2bn in AUM and has made 137 investments to date, according to Dealroom data. It has 24 unicorns in its portfolio, including travel company GetYourGuide, health insurtech Alan and transport booking app Omio.
One of its most successful investments out of its first early stage fund was in Spotify, which was valued at $29.6bn when it was listed on the stock market in 2018. But despite this, the fund is performing weaker than the others of its vintage, with an IRR (internal rate of return) of just under 10% (top funds deliver 20%).
Excluding that first fund, Lakestar says its other funds are in the top quartile with 22-44% IRR.
Asked whether the performance of the first fund affects Lakestar’s fundraising today — at a time when LPs are pressuring VCs to return capital — Struye de Swielande says: “Of course, every LP will look at a fund’s history, but I think you need to look at it in a larger context. We have raised six funds with a number of really great success stories… so this is not something that any LP would look at on an individual basis.”
European bets
With the new funds, Lakestar plans to make 20-25 early-stage investments and 10-12 growth investments.
Already, the new funds have led investments in companies such as energy supplier platform Fuse Energy, NEKO Health, the preventative health care technology company cofounded by Daniel Ek, AI text-to-video technology platform Colossyan and embedded finance solution Swan.
This article has been updated to clarify that Mika Salmi stepped down as managing partner at Lakestar and is now a venture partner.
