May 24, 2023

Data-driven early-stage VC Moonfire raises two new funds

Data-driven VC Moonfire Ventures has raised a $90m fund for early-stage startups and a $25m opportunities fund

Eleanor Warnock

3 min read

Data-driven VC Moonfire Ventures — which has more engineers on its team than investors — has just raised two new funds: a $90m fund for early-stage startups and a $25m fund to back outperforming portfolio companies. 

As with its first $60m fund, it will back pre-seed and seed-stage companies in Europe using AI, Web3 and AR/VR in four sectors: health, work, finance and gaming. The typical size for tickets that Moonfire leads is $1m-2.5m. It also participates in all portfolio companies’ next funding rounds, so the opportunities fund will be backing companies at stages from about Series A. 

Moonfire founder Mattias Ljungman, who previously cofounded European VC giant Atomico, says that 95% of the investors, or limited partners (LPs), in the first fund returned for the second fund: “We got a whole bunch of new LPs obviously, but a lot of them also increased [their allocation].” LPs include US state endowments, funds of funds and global family offices. 


Data-driven VC

Moonfire has been ranked as one of the top 10 “data-driven” VCs in the world, based on the percentage of engineers in the team and internally built toolkit. It’s part of a new generation of funds that are trying to fix the mostly manual and subjective process of investing by integrating technology into everything from how it sources companies to how it works with its portfolio. 

“AI is solving the grunt, manual work,” says Ljungman. “That gives us, as humans, the ability to focus on what we're better at: doing meetings, building relationships, providing insights and knowledge to our founders, allowing them to scale and be more successful along their journey.”

Partner and computer scientist Mike Arpaia says Moonfire has built tools that find opportunities by crawling the internet and determining if they're relevant for the fund (Moonfire’s human investors also source potential deals). The team reviews up to 50k companies a week — it estimates that’s 600 times the industry average — using custom AI models and a proprietary tech stack. 

Moonfire also has tools to help move companies through the evaluation process and get investors to add their input where needed. 

Arpaia says the company has also been incorporating OpenAI’s GPT models. Before those existed, he says interacting with models required using linear algebra. Now it’s possible to interact using just text prompts.  

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“We had one model called our ‘venture scale classifier’ where we classify whether or not companies venture scale,” he says. “We spent a quarter working on it to get a 5% improvement. GPT-4 came out, we wired it in in an afternoon: 20% improvement on the 5% that we spent a quarter getting.” 

They then built prompt-based versions for all of Moonfire’s models and found that GPT-4 performs better than 50-70% of Moonfire’s custom models. 

Track record

Moonfire was launched in 2020. So far, the firm has led 23 deals and co-invested in 27 others. Its portfolio includes Sweden’s GOALS, which is trying to create an NFT-powered rival to the football video game series FIFA (it recently raised a $20m Series A), payroll tech startup Pento and financial reporting tech company LiveFlow. LiveFlow was sourced through Moonfire’s AI engine. 

Despite the tech downturn, Ljungman says the quality of companies Moonfire has been seeing “remains high” and might increase “as people decide to start companies who maybe didn't even think about it before”. Moonfire has invested in companies with founders coming out of Revolut and Facebook, a phenomenon that he says speaks to the European ecosystem’s maturation. 

“We shouldn't be too caught up in 2021. It's now back to business the way it was before that, when it was tough. It's always tough. It's always difficult to build a business.” 


Eleanor Warnock

Eleanor Warnock is Sifted’s deputy editor and cohost of Startup Europe — The Sifted Podcast.