Highland Europe closes €1B growth fund

Growth investor Highland Europe has raised €1 billion for its latest fund—marking Europe’s first VC mega-fund to close this year, as LPs gravitate toward more established managers.

The vehicle is the firm’s fifth flagship fund and is more than 40% bigger than its predecessor, which closed on €700 million in 2020. This latest close brings Highland Europe’s total amount raised to €2.75 billion since it spun off from Highland Capital Partners in 2012.

Fundraising for European VC funds has become more challenging over the past year as LPs reevaluate their allocation to alternative investments amid a fall in public equity valuations and rising interest rates. A total of 212 funds closed in 2022, according to PitchBook’s 2022 Annual European Venture Report, down from 305 the year before.

However, the total capital raised for European funds marginally beat 2021’s record with €25.4 billion in commitments.

 

With more uncertainty in the market, LPs are increasingly placing their bets on managers with robust track records and experience in previous downturns.

Larger funds, which tend to be linked to experienced teams, are finding it easier than their smaller counterparts to secure LP commitments and attract new investors. In fact, 2022 saw its highest number of €1 billion-plus fund closes since 2017—including EQT Ventures III, which amassed €1.1 billion, and Northzone’s €1 billion Fund X.

Highland Europe’s Fund V will follow the same strategy as earlier vehicles, backing software and consumer internet startups. Current portfolio companies include food brand Huel and analytics specialist Contentsquare. The firm targets growth investments, which are maintaining their popularity despite the downturn.

Last year, Europe saw 462 venture growth deals close, according to PitchBook data. This represents 4.2% of all European VC rounds, their highest share of overall deal count to date.

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