Venture Capital/News/

LocalGlobe launches new scaleup fund to go to IPO and beyond

It puts LocalGlobe in a pretty unique position among European VCs

By Amy Lewin

The LocalGlobe team

The LocalGlobe empire has been steadily growing — and today it officially gets even bigger.

The London-based VC firm, known for investing in European startup successes like Wise, TravelPerk, Monzo and Zego, has raised a new scaleup fund to back businesses from Series D all the way up to IPO. 

Called Solar, the fund will also continue to hold its stakes in startups “well into the public markets”, says LocalGlobe cofounder and partner Saul Klein. 

The move sets LocalGlobe apart from most other European investors by making it able to back startups pretty much through their full lifecycle — from pre-seed to public listing. The firm (formally known as Phoenix Court Group) now has four separate funds: LocalGlobe, which backs startups at pre-seed and seed; Latitude, which invests at Series B and C; Solar, the scaleup fund; and Basecamp, which invests in other VCs. 

It also comes at an especially turbulent time for later-stage funding and public listings, with growth-stage valuations dropping all over the place and most startups putting off an IPO until next year, at least.  

Investing in scaleups

Solar will be led by the newest LocalGlobe partner, Paul Bishop, who’s joined the team from pension fund Railpen. He’ll be supported by the broader LocalGlobe team (there are no especially strict divisions about who invests at which stage) and two other recent hires: head of finance Rebekah Kofo-Kasumu and finance director Rajee Seelan.

So far, it’s done a handful of investments — including into edtech unicorn Multiverse, which raised a $220m round earlier this month. The plan is to participate in roughly 20 companies from the first fund, and Klein anticipates that around 80% of those businesses would also have been backed by one of LocalGlobe’s other funds. 

Klein hopes that this will help Solar get into some great deals — even though it won’t be able to write huge cheques. “It’s better the devil you know.” 

It’ll also send a positive signal to other investors getting into these later stage rounds, he adds: “Being someone who’s committing again to the business, and can say to others this is why we’re committing again… that counts for something.” 

Solar founders will also have access to a community of 30 or 40 CEOs and CFOs who’ve already done the journey from private to public company, adds Klein. LocalGlobe itself also saw eight portfolio companies go through an IPO last year. 

The £100m+ funding gap

“£100m+ scaleup rounds are massively underweight in this geography — and massively underweight from a domestic capital perspective,” says Klein. Data from Dealroom suggests that less than 20% of $100m-250m+ rounds in 2020 and 2021 came from European investors — and Klein isn’t the only investor who thinks that lack of late-stage capital in Europe is a problem.

“The structure of the Solar fund allows us to participate in those rounds — and to maintain our position as long as our thesis on the company is maintained.” That means Solar could hold shares in businesses six or seven years after an IPO. 

“£100m+ scaleup rounds are massively underweight in this geography”

Currently, LocalGlobe holds shares in listed businesses like Wise, Oxford Nanopore, Twitter (via the sale of TweetDeck) and Cazoo. Some are currently performing better than others — online car dealer Cazoo’s share price has been on a steady decline since January — but on that, to demonstrate his long-term thinking, Klein says: “We’re not even looking at the stock price.” 

To date, Wise has been LocalGlobe’s best investment and set “a good high bar”, says Klein — although even Wise is having a rocky time at the moment, with its share price dropping 54% over the past six months.

Over the long term, the goal is to generate a 3x return from the Solar fund; the earlier stage Latitude fund, by comparison, is hoping for a 10x return. 

Investing in other VCs

As well as institutionalising the Solar fund, LocalGlobe is also making its investments into other VCs official with the Basecamp fund. 

For as long as Saul Klein and his father Robin Klein have been investing in early-stage startups, they’ve also been backing emerging fund managers. “10+ years ago, it was about supporting other people, peers, as angels,” says Klein, who invested in the likes of Seedcamp and Entrepreneur First in their early days.

“But as we saw how some of these funds developed and performed over the years, we also saw coinvestment opportunities.” 

Investing in other VCs and solo GPs gives LocalGlobe even better visibility of what’s going on at the early-stages, and gives its later stage fund Latitude a juicy pipeline of deals at Series B and C. 

For the VCs it’s investing in, being part of the Basecamp community involves more than just capital. There are regular workshops with LocalGlobe LPs — the likes of Railpen, Horsley Bridge and LGT — on topics like recycling, portfolio construction and creating SPVs [special purpose vehicles]. Even LPs that aren’t invested in LocalGlobe — like the EIF and BBB — have got involved. For them, it’s a good sourcing activity, says Klein; both for fund managers to back in the future, and for coinvestment opportunities. 

“Like a good angel can get into most deals, a good LP can get into a lot of funds because we’re bringing something to the table more than capital,” says Klein. “And now, we can also bring a lot of capital over time to the table.” 

Funds backed by Basecamp include the UCL Tech Fund, Tiny, Air Street Capital, Cocoa, Future Positive Capital, JamJar and Outsized Ventures.

Phoenix Court Works

Along with its four funds, LocalGlobe runs Phoenix Court Works, a foundation that funds organisations in King’s Cross and Somers Town in London, the neighbourhood where the firm is based. 

The foundation is funded through the allocation of 10% of profits from Phoenix Court Group’s management company and 2% of carry from all the funds. 

More than 23 organisations have now been supported by Phoenix Court Works Foundation, including a community garden, food bank and the local primary school.

“Being a good neighbour and supporting the ecosystem is in our DNA,” says Klein. 

He’s also big on being a good employer. It’s not just LocalGlobe’s 13 partners who have carry in the funds — everyone on the team does, including the front of house team members. “Everyone gets carry, everyone gets profit share and everyone gets a chance to invest in all of the funds,” he says. 

The LocalGlobe portfolio

LocalGlobe now has 200 companies in its portfolio, and has invested in 18 companies at seed stage that have gone on to hit unicorn status. That puts it just beneath Accel (24) and Sequoia (20) on the unicorn collecting leaderboard. 

Portfolio companies include: 

  • London-based secondhand car marketplace Motorway 
  • Barcelona-based business travel startup TravelPerk 
  • London-based business bank Tide 
  • London-based security startup Tessian 
  • London-based online used car dealer Cazoo 
  • Stockholm-based micromobility startup Voi
  • Berlin-based vertical farming company Infarm
  • Paris-based search platform Algolia
  • London-based games startup Improbable

Amy Lewin is Sifted’s editor and cohost of The Sifted Podcast (listen here). She tweets from @amyrlewin

Join the conversation

avatar
  Subscribe  
Notify of