CEE tech investor 3TS hits €103m first close

Kimberly Romaine
12 September 2013

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Dedicated CEE-focused technology investor 3TS Capital Partners has reached a €103m first close for 3TS TCEE Fund III.

The fund follows on from the €40m TCEE Fund II raised in 2007 in partnership with Cisco. TCEE Fund I was a €66m predecessor to that.

3TS was set up in 1999 by Finland-based Sitra and Germany-based Technologieholding to manage two funds totalling €66m. In 2005, a new €100m follow-on fund was raised, with 3i the sole limited partner. In 2007, 3TS partnered with Cisco Systems to launch a new tech fund for CEE (3TS Cisco Growth Fund, later renamed TCEE II) to invest €1-4m in technology, media and telecommunications (TMT) SMEs.

In 2009, 3i's strategy shift meant 3TS was forced to sell out part of the portfolio early in secondary transactions and 3TS's management bought out the remaining assets through a new vehicle.

3TS had been speaking to LPs about a follow-on to that vehicle, as well as continuing its technology focus. "LPs suggested we focus on just one vehicle, and technology is what we're best known for in the region," explains Daniel Lynch, managing partner at 3TS.

Indeed, 3TS was the first institutional investor behind the success of the $342m LogMeIn flotation in 2009, with the GP reaping 9.1x money. Other investors included Prism VentureWorks, Polaris, Integral Capital Partners and Intel Capital. More recently, the firm was behind the sales of SolveDirect and Investor.bg in Q2 this year.

Besides, the region is now firmly accepted as part of Europe by LPs, according to managing partner Pekka Santeri Mäki: "This means firms operating in CEE can no longer rely on a special growth story; they need to focus on their core competence."

TCEE III was launched last summer as a Luxembourg-regulated vehicle. It is structured with a five-year investment period, five-year exit period and with the possibility of two one-year extensions. Terms are standard, at 2% management fee, 20% carry and 8% hurdle. There are three key-men in the fund: Lynch, Mäki and partner Jozsef Köver.

A final close on the €120m target is expected early in the new year.

Luxembourg-based Bonn Steichen & Partners is providing legal advice. No placement agent is being used for the vehicle.

Investors
Cisco, EBRD, EIF and OTP Bank have provided capital for this latest fund. The firm expects to bring a few additional LPs on board in the coming months.

Investments
3TS TCEE Fund III will invest in three to five CEE-based TMT businesses per year, focusing on expansion injections ranging from €2-10m. Deals outside this range may be considered in "exceptional cases". Sectors the firm will target include technology and internet, media and communications and technology-enabled services.

The team operates out of offices in Budapest, Bucharest, Istanbul, Prague, Vienna and Warsaw.