At roughly 17 years old, DN Capital is one of Europe’s oldest venture capital firms, albeit one that, by its own admission, has retained its scrappy roots and a certain kind of reputation to go with it. The VC hasn’t gone without success either, most recently seeing portfolio company Shazam exit to Apple in a reported $400 million deal, apt timing for the announcement of DN Capital’s new fund.
That comes today with confirmation that London, Berlin and Menlo Park-based firm has closed its fourth fund: a fresh €200 million to be used primarily to back seed and Series A-stage companies in the VC’s “sweet spot” of marketplaces, SaaS, fintech, digital health and consumer mobile apps. In other words, aside from more money to deploy, it’s business as usual for DN.
To date, I’m told that around two-thirds of DN Capital’s investments have been made in Europe, with the remainder coming from the firm’s Silicon Valley office in Menlo Park. This has seen it make 59 investments in nine countries, resulting in 17 exits (3 IPOs and 14 trade sales). They include Endeca (Oracle), Purplebricks (AIM: PURP), Quandoo (Recruit), Eve Sleep (AIM: EVE), Lagan (Kana), and Datanomic (Oracle), alongside Shazam, of course.
How many of its portfolio companies have dead-pooled, it doesn’t say, of course. Though, to be fair, when you have had skin in the game as long as DN Capital, failure is par for the course.
With Fund IV, the firm’s European focus will continue, particularly in Germany, although the U.K., the Nordics, and France also get a mention. DN Capital U.S. investments will primarily be on the West Coast and “the Boston-New York corridor”.
In a call with DN Capital founder Nenad Marovac, he sounded understandably upbeat, given the Shazam exit, and even more recently a €460 million investment by Softbank into used car marketplace Auto1, which DN Capital backed at Series A back in 2013.
He also reminisced about how he first sourced the Shazam deal (via his mother, apparently), and the early day’s of Berlin’s tech startup scene, in which the VC remains especially bullish. “I spend 50 percent of my business time in Germany,” he told me.
In some ways, Marovac actually thinks Berlin has London beaten. “If you take a shorter period of time, since 2012, we think Berlin is ahead… [measured] by companies that are breaking out into very high market caps,” he says, citing the valuations of Delivery Hero, Rocket Internet, Zalando, and Trivago. “I don’t see the same thing happening in the U.K. market”.
And that’s before factoring in the affect of Brexit, which hasn’t even taken place yet. The DN Capital founder describes himself as “definitely a pro-Europe person” and that less borders and less restrictions are better for Europe.
“I think a hard Brexit would be detrimental to the U.K. in general, in terms of venture. It seems like things are softening up, which is in all of our interests,” he says. “Europe has to compete against China and America, and I think being fragmented makes Europe as a whole weaker, so I think together, Europe has a much better chance of competing against these much bigger continents”.
Has he noticed Berlin gaining an additional pull factor, post the U.K. Brexit referendum result? “Absolutely, yes,” Marovac answers resolutely. “A lot of people that might have wanted to come to London a couple of years ago have decided to either go to Berlin or stay in their local country, for sure”.
In terms of investment thesis going forward, DN Capital believes there is still a lot of room to invest in marketplaces and software, the areas of tech where the firm cut its teeth. For example, European job site Joblift is a recent marketplace investment. Another area the VC sees a lot of potential is health tech, specifically the merging of healthcare and digital in the form of software coupled with new hardware.