Two large equity funds came out of the gate this week. So, what gives?
Earlier this year we covered how Liquidity group, a growth-stage debt funder, raised $40 million and launched a $250 million debt fund for technology companies. Backers included Apollo (the private equity firm and owner of Yahoo!) and… MUFG (Japanese bank).
Liquidity is an interesting beast. It is part technology platform and part lender, using its technology to make decisions on deploying debt facilities and other financial solutions from $5 million to $100 million. It claims that its processes are relatively faster than traditional methods.
And it’s easy too.”Mars growth capital europe“A $250 million debt fund to provide growth financing specifically for late-stage technology and middle market companies.
Now, MUFG and Liquidity are teaming up to launch five non-dilutive (debt) funds under Mars. This is our first equity fund, powered by the same technology referenced above, and will target late-stage/growth-stage companies. Both Mars Growth Capital and Dragon Fund itself are based in Singapore and the fund targets equity investments in the Asia-Pacific region.
The Dragon I Fund will make growth equity investments in private, mid-cap and late-stage technology companies and technology-enabled companies, initially focusing on the Asia-Pacific region. Deal sizes range from $20 million to $100 million. MUFG is also expanding its capital commitments to Mars Growth Capital’s non-dilutive fund of funds from $750 million to $1 billion.
“With the power of Liquidity Group’s machine learning platform, investment teams will be able to evaluate investment opportunities more comprehensively and at a faster pace,” Ridhi Chaudhary, managing director and general partner of Dragon Fund, said in a statement.
Meanwhile, Dawn Capital, one of the largest B2B software venture capital firms in Europe, this week raised $700 million in investment. The move was even more significant news for early-stage companies.
This includes the $620 million Dawn V venture, which is targeting Series A and B stages with seed investments between $10 million and $40 million, and enough capital for follow-on rounds. Dawn Opportunities III will be an $80 million follow-on, later-stage fund targeting Series C onwards.
To date, Dawn has invested in Mimecast (formerly Nasdaq-listed, which was taken private by Permira in a $5.8 billion deal), iZettle (sold to PayPal for $2.2 billion in cash), and Tink (bought by Visa for $2.0 billion ), and LeanIX (recently acquired by Dawn). SAP), and more recently, Collibra, Dataiku, and Quantexa, all unicorns.
Haakon Overli, general partner at Dawn Capital, describes this as “a sweet spot in the investment cycle, and we see the opportunity in Europe growing.”
So what should we do with the arrival of such money?
Well, here are some notes you might want to think about.
Firstly – and this is what I hear at private dinners and drinks among venture capitalists in London, for example – late-stage capital comes back to back the pro-IPO companies.
Frankly, most observers know that the last quarter of this year will be stable. However, it will now become a key marketing period for late-stage and growth funds to get into companies waiting for markets to rebound in Q1/Q2 next year. And they want to be in those deals. Hence, liquidity comes out of the gate along with the above. No doubt there will be others.
Second, pure early-stage venture capital funds like Dawn, which have a lot of experience in deep tech (one might say) are quite happy to raise and distribute early-stage money right now. It will take at least a few years for these bets to mature, and with lower valuations, early-stage VCs with new money this year are getting much better deals than those posted in 2021 and 2022 (where there are still significant, painful impacts). . In addition, generative AI booms will absorb a lot of early-stage capital.
These sentiments were echoed this week at two events I attended in London, one of which, coincidentally, involved an early-stage fund, the other a late-stage fund. For example, here’s an early-stage finance partner over drinks: “Market is good early-stage, especially in AI. Rest of this year for IPOs? Dead. Everyone’s waiting for next year.”
Meanwhile, the late-stage VC dinner was optimistic about the year ahead and even talked about deploying late/growth capital to prepare their portfolio for M&A and IPO. A typical statement is “We are preparing to help our companies do M&A this year, and we look forward to next quarter for the markets to return.”
So you at least have some explanation as to why these big funds are emerging in what on the surface appears to be a declining/steady market for startups right now.