Finch Capital to start raising EUR 250m fund next year

The Amsterdam-based venture capital firm plans to approach US-based investors to become LPs in the new vehicle, Vlaar said. It currently has a strong core of mainly European and Asian LPs, he said.

The new fund will follow a similar strategy to Finch's previous funds, Vlaar said. The firm invests in early-stage fintech, proptech and medtech companies, and is currently investing from its third EUR 150m fund, Europe III, which it closed last year, according to Unquote Data. It plans to finalise two more investments with the fund by year-end.

Investments

Finch is keen to invest in fintechs developing open banking, wealth management and regulatory solutions, as well as ESG reporting and compliance platforms, Vlaar said. In proptech, it likes companies developing new technologies for the construction sector, he added.

Finch targets businesses with a proven product-market fit and are generating EUR 2m-EUR 10m in annual recurring revenues. It is important that potential targets have a clear eventual exit path to provide liquidity, Vlaar said. The firm typically exits companies either through a trade sale or in sale to sponsors. With so much dry powder available at the moment, Vlaar expects to see more buyout groups participate in the technology sector, providing liquidity for early-stage investors.

Finch typically seeks to acquire a significant minority stake in its portfolio companies with initial EUR 5m-EUR 10m tickets, he said. Roughly a quarter of its investments are buy-and-build plays where it aims to consolidate a particular sector through bolt-on acquisitions, he said. It does not invest in hardware or anything with a high burn rate.

The firm can participate in deals up to EUR 50m by forming separate co-investment vehicles with its limited partners for specific investments, the executive said.

Finch plans to complete a further five-seven deals next year, Vlaar said. It is currently a good time to deploy capital as valuations have fallen and many investors' risk appetite has come down, meaning that there is less competition, he said.

Vlaar sees the European fintech sector becoming "more healthy" in 2023 with fewer but higher-quality investment opportunities following this year's drop in technology valuations.

Alongside its investment plans, Finch is seeing investor interest for its portfolio companies and expects to complete two exits, from companies in its first two funds, by year-end, Vlaar said. It has already exited a number of investments including Salviol and Cermati.

Vlaar founded Finch in 2013. The firm raised its first EUR 40m fund in 2014 and its second EUR 110m fund in 2017. Its portfolio includes Twisto, Zopa, and BUX.

The VC-firm has offices in Amsterdam, Dublin, London, Jakarta and Singapore, Vlaar said.

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