A new hope: HV Capital raises record €710M to invest in European startups

The first quarter of 2023 was pretty bleak for the European startup ecosystem, to say the least. Funding fell a whopping 57% compared to Q1 of 2022, and fundraising is on pace for the lowest total since 2015. As such, the recent developments being heralded from Berlin might bring particularly welcome succour. 

German VC firm HV Capital announced today it has raised its ninth and largest fund ever, with €710 million for investments across all growth phases – all the way from pre-Seed to Series D and beyond. 

The fund is backed mostly by institutional investors from Europe and the US. HV Capital says it will be divided almost evenly into two vehicles: Fund IX Venture and Fund IX Growth. Ticket sizes will range from €500,000 to €60mn.

While the firm will look extensively at deals inside Germany, it also wants to place about 40% of the fund throughout Europe. Reiner Märkle, General Partner at HV Capital, said the record fund would provide the firm with “new opportunities to invest in the next generation of disruptive ideas.”

Indeed, HV Capital, who was an early backer of German e-commerce company Zalando, has already made four investments from the fund. One of these is in Berlin-based SPREAD, who makes augmented engineering intelligence platforms. Another is in GovTech startup Polyteia, also from Berlin, providing authorities with data infrastructure to help “improve and accelerate decision making.” 

Fund IX has also invested in B2B energy management platform ecoplanet, based in Munich, and female-founded monitoring, reporting and verification (MRV) software developer Agreena in Copenhagen, which supports agriculture with regenerative farming practices and carbon monitoring. 

HV Capital said it had established the fund with a view of “advancing ESG in the venture capital ecosystem,” with commitments made under Article 8 of the EU’s Sustainable Finance Disclosure Regulation, or SFDR. 

By the end of the fund’s lifecycle in a decade, the firm says it is targeting at least one-third of women in executive positions across the portfolio. Furthermore, HV Capital will aim to have at least 30% of the fund allocated to companies aligned with the climate goals of the European Investment Fund (EIF). 

SFDR?

If this is the first time you have come across SFDR, consider yourself acquainted with one of the potentially most impactful principles in whether or not your company will receive funding moving forward. Basically, it is a set of rules laid out by the EU designed to counteract greenwashing, and to help investors make more informed decisions about sustainable investment. 

Obligated firms will need to disclose potentially negative consequences an investment decision may have on sustainability factors (environmental and social), and how they are mitigating the impacts, on an annually recurring basis. While it is up to individual member states to decide on financial consequences, there are other potentially adverse effects of non-compliance, such as reputational penalties and sending poor signals to current and future investors.