Venture capital group Partech has closed its latest seed fund, raising €120m — and says that more available talent in the wake of layoffs is creating a “perfect storm” for new startups.
The Paris-based firm’s fourth seed vehicle will invest in approximately 50 companies and retain 60% of the capital for follow-on investments, which can go up to Series B. With initial cheques from €300k to €3m, the fund will target pre-seed and seed-stage companies globally as a lead or co-investor.
It’s one of a few significant seed funds that have been raised across Europe in the second half of this year, including Index’s $300m seed vehicle, Dutch firm Peak VC’s €150m fund and Swedish firm Inventure’s €150m pot. But fund managers say fundraising has never been harder amid the tech slowdown.
Partech launched its fundraising process in the first quarter of the year and noticed that as the year went on, the questions from potential investors were getting tougher.
In the current market, LPs wanted to understand whether the group’s current performance was based on the inflated valuations of companies from the previous year or not. There was also increased scrutiny on sustainability, general partner Romain Lavault says.
The other question was whether now is a good time to invest in a seed fund. With the fund focusing the majority of its investments — some 80% — in Europe, Lavault believes there is significant opportunity in the continent.
“In Europe, we now have a maturity where we see second-generation and third-generation ‘mafia founders’, who are ex-employees at unicorns, who understand what making mistakes is about. We haven’t seen a drop in deal flow in seed rounds and the quality of the projects is incredible," he says.
The fund attracted capital from financial institutions, family offices and 100 entrepreneurs, 35 of whom had been funded by Partech in the past. The fund is managed by a team of 10, including six dealmakers, and will be supported by the entrepreneurs who invested their capital.
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Opportunities in geopolitically-strategic tech and recruiting talent
Although the fund isn't focusing on any one sector over another, Lavault says that ongoing crises are creating a new market configuration in a number of areas including energy, space, semiconductors, artificial intelligence, healthcare and climate-related technologies.
“In today’s world, Europe is understanding at a political level that we need to have European solutions. We have a window of opportunity now where politics, strategy and economics are all aligned to create those European behemoths,” he says.
There are advantages on the recruitment side of things as well, according to Lavault. In the past, scaleups with sky-high valuations were hiring talent with inflated starting salaries, making it more difficult for seed-stage companies to compete. However, a number of unicorns in Europe, including Klarna and Gorillas, have been laying off staff to cope with the tougher market environment. In Lavault’s opinion, this means that young startups can once again compete in the talent market.
“80% of the job of going from seed to Series A is about recruiting an A-plus team,” Lavault says. “As most large players are laying people off and employees are leaving their current unicorns, it creates a perfect storm for seed companies.”
So far this year, Partech has invested in 20 seed rounds. The firm’s previous seed fund raised $100m in 2020 and has funded a number of unicorns including NFT fantasy sports gaming platform Sorare and Latin American ecommerce aggregator Merama. That fund completed all its seed round investing last December and is now at a stage where it is reinvesting with businesses going on to raise Series A rounds. Just last week it participated in the $33m series A fundraise of V7, a data engine for vision AI.
Partech’s seed deal team has also previously backed French fintech Alan, New York-based digital media company Jellysmack and Indonesian payments group Xendit.