In spite of diminished venture capital outlays for technology startups, Dawn Capital, one of Europe's most prominent tech venture capitalists, has raised $700 million via two new vehicles: a $620 million early-stage fund and an $80 million "opportunities" fund to give aid to growth-stage companies already part of its own portfolio. Dawn Capital, based in London, boasts a number of illustrious names among its portfolio; including iZettle, acquired by PayPal, and Tink, now owned by Visa.
Dawn Capital, a top investor in European business-to-business software firms, raised a total of $700 million in two new funds, intensifying its search for tech innovators amidst an overall decline in venture capital funding for tech startups. The London-based venture capital firm, with investments like PayPal's 2018 buyout of Swedish online payments firm iZettle and Visa's 2022 acquisition of Swedish open banking company Tink, is a major player in the European tech scene.Hannah Gubbins, who recently became a partner at Dawn Capital, commented that despite the current struggles of slumping private company valuations and waning enthusiasm for technology, the firm was successful in securing the funds thanks to the long-term relationships they had formed with institutional investors. Gubbins went on to explain that although investors could not allocate as much to venture due to the market's wider effects, those with strong conviction still managed to pour money into the right projects.
"Investors are still excited to be investing in this market," Gubbins said. "Some of the best companies, some of the best vintages have come out of the dotcom [bubble], out of the global financial crisis. They know that, they sit on the data."
The new funds, dubbed Dawn V, will be split into two categories. The first is a $620 million early-stage fund for Series A and Series B investments, and the second is an $80 million "opportunities" fund intended to finance potential IPOs and takeovers of Dawn Capital's portfolio of companies. Altogether, the firm plans to invest in 20 companies with the new funds.
Venture capital investment has seen a sharp decline as investors reconsider their investments in light of rising interest rates and inflation. Owing to high interest rates, companies with a longer-term focus on growth and making losses have become less attractive. Conversely, firms with more stable income and profits are receiving more attention.Investors have been monitoring the recent IPOs of companies like Arm and Instacart, in order to determine if the tech sector is bouncing back.The accelerated growth of tech seen in 2020 and 2021 due to the pandemic, as people moved to online platforms for activities such as shopping and remote work, was greatly helped by the low-interest rates set by the central banks. This has now changed in the last year.Regarding when the IPO market will reopen, Gubbins said there is no definitive answer. They are however looking at the debuts of Arm and Instacart as possible indicators of when the situation will stabilise.Gubbins commented that the IPO route is not the only way for founders to exit, highlighting the acquisition of LeanIX - an enterprise architecture management software company in Dawn's portfolio - by German software giant SAP, as an example of successful technology exits in Europe.
Despite the downward trend in tech, investment in artificial intelligence is soaring. OpenAI, Anthropic and Cohere, firms researching "foundational models" that create content from written prompts, have together received billions of dollars in investments. Although AI has been at the forefront of conversations at Dawn Capital, the focus for the company still lies in business-to-business software, such as financial technology, security, and infrastructure. As Gubbins explained, “We’re doubling down on what we’ve always done. AI is, without a doubt, something we take into account. We invest in AI companies, but also recognize how AI is transforming and disrupting every sector and company.”
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