Consumer-Focused Venture Capitalist Heartcore Raises $ 250 Million in New Fund
Now is not a bad time to be a consumer focused venture capital firm in Europe.
On-demand food delivery is spicier than ever, consumer fintech and the insurance are taking huge tours, “food of the future” startups are popping up all over the continent, health technology is in the limelight like never before and the adoption of e-commerce has massively accelerated.
Heartcore, the VC based in Copenhagen, Paris and Berlin, hopes to ride this wave.
He has just raised a new $ 200 million start-up fund to invest in some 30 consumer companies across Europe. Its backers include large institutional investors like the European Investment Fund and also – for the first time – 25 founders of its portfolio.
He also raised his second opportunities fund, $ 50 million, to support some 15 remarkable companies in his portfolio throughout their growth cycles.
The great opportunity of “opportunity” funds
Early stage venture capital firms in Europe – including Balderton, LocalGlobe, Octopus and Dawn Capital – are increasingly raising ‘opportunity’ funds to support their portfolio companies (and sometimes companies they own. “Missed” earlier) during growth cycles.
“The opportunity fund aims to be able to continue to support emerging companies within the portfolio. “
“The opportunity fund aims to be able to continue to support emerging companies within the portfolio,” says Yacine Ghalim, partner at Heartcore. So, for example, when the wallet GetYourGuide company raised a $ 484 million round of funding led by SoftBank in May 2019, Heartcore could participate – from its “progression” fund.
“Especially with the tower sizes that we see, when the growth rounds come in it’s hard to keep investing and pro-rata the main fund, which is why we have this sub fund.”
It is also a way for VCs to increase the “products” they offer to their investors – LPs (limited partners).
“Not all LPs are interested in the same risk profile. The fund at an earlier stage is riskier and more profitable. When these bets work, they really work. Some LPs love it, and that’s what they want to achieve.
“Some LPs look for a slightly different risk / reward profile; they’re looking for things that are partly risk-free – and also have lower returns. ”
“The separation of these two funds allows you as a VC to speak to different audiences. ”
From its first progression fund, Heartcore invested in four portfolio companies (Tink, GetYourGuide, TravelPerk and Peakon), some in multiple growth cycles. With its second progression fund, it also aims to support four or five ‘breakouts’.
The basic fund
As with its previous start-up fund, Heartcore will continue to invest in “all major categories of consumer spending that are not penetrated by technology; where there is no major consumer brand.
Its portfolio so far includes four “unicorns” (GetYourGuide, Tink, Boozt and Neo4j), as well as virtual food brand startup Taster, on-demand grocery delivery company Weezy, and the Podimo podcast platform. So far this year it has announced investments in the laboratory foie gras startup Gourmey, Roadsurfer motorhome rental platform, mobile banking application for migrants Health technology for the majority and the “elderly” Omohealth.
Heartcore typically writes checks ranging from $ 300,000 to $ 6 million, with an average of around $ 2 million.
Its first two early-stage funds (this latest is its fourth) track above 5x the invested capital multiple (MOIC) – one of the measures by which venture capital funds are compared by LPs.
“Our funds are consistently in the top decile,” says Ghalim.
What is new for this fund, however, is the participation of the 25 founders as LPs.
They include Phillip Chambers and Kasper Hulthin of tech startup RH Peakon, Paul Crusius and Marco Vietor of hearing technology Audibene, Morten Strunge of Podimo, Max-Josef Meier of car subscription service Finn and Hermann Haraldsson of fashion company. online Boozt. None of the 18 fof the founders of the Heartcore portfolio accepted the offer.
“We’re fortunate to have founders who have cash and have left companies, and they came to us and were like, we would like to invest in early stage technology but maybe don’t have the bandwidth to be active business angels in 20 companies… “
“From our side, we felt it was a great way to bring together entrepreneurs and operators who had done so before with some of the companies in our portfolio,” adds Ghalim. “We think they will help us with sourcing and we are making interesting transactions, we will invite them to co-invest [as angels]. We hope they take an interest in it, but there is no obligation. It is purely based on trust.
“We look at crypto and ‘Web 3’ a lot,” Ghalim says; the shift to decentralized data and advanced computing. “We see this as the next platform.”
“We think maybe Web 3 can redefine all of these mainstream businesses – like Uber, Airbnb, Facebook, Spotify – and create decentralized versions of them. ”
“What happened with Web 2? [media] age – is that a lot of the value that has been created has basically gone to the center, to these big companies, and they have created trillions of value. But when you think about it, very few people have benefited from it; mainly the first investors of these companies and the first team.
“[But what if] Did all of us – Facebook users, Uber drivers, Airbnb guests and hosts – have equity in these projects? “
“[But what if] Do all of us, Facebook users, Uber drivers, Airbnb guests and hosts, have equity in these projects? What if you wanted every Uber driver to have a share of Uber every time they work? Web 3 is a revolution because it provides this tool; this will allow a large part of the value created to flow to the periphery of the networks.
The OpenSea NFT (non-fungible token) auction market is one example of how this could work, Ghalim adds. “It’s like a decentralized version of Sotheby’s or Christie’s.”
“I think these things are going to emerge in the next 10 years or so. ”
Amy Lewin is the associate editor of Sifted. She covers VC, foodtech and diversity in tech, and tweets from @amyrlewin.