Fund in focus: LVP launches mobile gaming vehicle

LVP Seed Fund I will commit equity tickets ranging from $50,000-500,000 to 20-25 portfolio companies. According to general partner Paul Heydon, the size of the fund is between $6-12.5m.

The vehicle is the first raised by LVP with third-party money, and Heydon told unquote" that LVP partners had committed more than 20% of the fund's equity.

He says a final close for the fund is expected before Christmas, noting that the fund has a fairly substantial investor coming in and waiting for the LP was the key reason for keeping the fund open.

The fund will commit seed capital to European game developers, which make games for mobile, tablets and social media, similar to the developers of Angry Birds and Zynga's FarmVille.

LVP's fund illustrates a growing trend in Europe of highly specialised, niche venture funds, many of which are tech-focused and based in - and/or targeting - the Nordics.

Heydon notes a similar trend had started in the US tech sector a couple of years ago, with angel investors making bigger investments and $5-50m seed funds being raised.

He believes a similar trend may be happening in Europe, noting that specialist seed funds have been appearing in the European market and that there had been a high level of interest in LVP's new fund.

Niche cravings
There are indications that LP appetite for niche vehicles in Europe is growing; indeed, Zynga CEO Don Mattrick alongside online games developers Nexon and Wargaming are among the LVP fund's backers. The Nordics alone provide numerous examples of highly specialised seed and venture capital funds.

Denmark's Sunstone Capital focuses on life sciences and technology ventures, with a total of seven specialised funds, while Finnish GP QLC Partners funds targets with intellectual property development opportunities and assets.

In Sweden, Creandum is an enthusiastic investor in disruptive tech start-ups and an early backer of Spotify, while Norway's Alliance Venture manages a seed fund focusing on Norwegian IT companies.

The argument in favour of these types of funds is that they can offer a more tailored, hands-on approach to small niche companies in need of guidance during early development, thanks to in-house expertise larger GPs may not have.

Additionally, specialised GP teams may be more well-suited to find companies offering niche products and services that generalists are unlikely to know about.

A recent example is Sunstone's $2m seed round in Kontakt.Io, a Polish start-up developing hardware and software for a type of micro-location transmitter called Beacon.

The prevalence of niche investors in the Nordics is not a coincidence. The region has an abundance of start-ups, particularly in software development, supportive environments cultivated in part by government investment programmes and good access to other funding.

Heydon says despite the GP's targeting opportunities across Europe, most of its investments to date have been in Finland, which has been the most interesting market for LVP.

According to Heydon, there is an abundance of talent and ideas in Finland, stimulated by the government's Tekes investment programme which has been investing €30-40m a year in Finland's tech sector.

Tekes matches investments in start-ups euro-for-euro without diluting equity, allowing GPs to leverage their capital, and Heydon said the scheme has turned Finland into a tech-hotbed.

It is among a number of government investment mechanisms across the Nordics that have invested in a number of internationally successful start-ups, including LVP portfolio company, Supercell - valued at $3bn just a year after launching.

The current state of the tech market - and gaming sector in particular - means a start-up can grow from two coders in a basement to a multi-billion euro business within a few years, and niche funds hoping to get in on the ground floor may see hefty returns from their successes.

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• Topics
• Funds
• Venture
• Fundraising
• Technology
• Fund in focus
• London Venture Partners (LVP)
• Creandum
• Sunstone Capital A/S
• Finland
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