3TS holds first close for Fund IV

"Fundraising is a continuous process, and, during the pandemic, we were in the middle of the path towards a first close," 3TS partner Sever Totia told Unquote. "Around 80% of the fundraise was virtual – but we are lucky enough to have a number of new LPs coming in at the first close. We had known each other for a number of years, which helped tremendously."

Totia did not disclose the amount raised by the fund at first close, but said the vehicle expects to hold a final close in spring 2022.

3TS Fund III held a final close in September 2013 on EUR 103m. The fund was fully deployed by Q4 2019.

3TS has invested in more than 50 companies to date and has exited more than half of them, the GP said in a statement.

Asked about the performance of 3TS Fund III, Totia told Unquote: "We are happy with the performance of the fund, and we are glad to see the exit pace has accelerated. Our companies in that fund have been growing revenues 30-40% per year on average over the past five to six years, which is the best forward indicator of fund value."

The firm's recent exits include the sale of file synchronising and collaboration software Tresorit to Swiss Post in July 2021.

In addition, the firm manages a Romania-focused strategy, with the option to invest in neighbouring countries. The latest vehicle was launched in April 2019 and has a EUR 40m target, according to Unquote Data. The fund deploys equity tickets of up to EUR 1m, providing additional capital for follow-on investments.

3TS has offices in Helsinki and Vienna, with an additional presence in the US. The firm was formed in 2000 and was originally affiliated with 3i Group.

As 3TS's strategy and fundraising has developed, the firm has incorporated ESG into its processes, Totia told Unquote. "We incorporate this into our investment decisions, portfolio management and reporting, and we have done this since 2016. We have an internal methodology for this. ESG is close to being a standard for LPs, so to have it is a given rather than an outlier."

Investors
LPs in the fund include the European Investment Fund (EIF), Erste Group, and Finnish industrial holding company Tesi, as well as several family offices and technology entrepreneurs. Around 60% of the fund's LPs are existing LPs at the first close, with around 40% of the LP base made up of new investors.

Previous investors in 3TS's funds include the KfW, Cisco, OTP Bank, the European Bank for Reconstruction and Development (EBRD), Sitra (the Finnish Innovation Fund) and 3i. "This fund will have a broader base of LPs than the previous one," Totia said. "We add a set of new LPs for every fund to provide diversification over time."

Investments
The fund will make growth investments of EUR 5m-20m, backing businesses in the technology, internet, media, communications, and technology-enabled services sectors. "We think there is a tremendous opportunity around cybersecurity and ongoing threats, as well as in data management and analytics for decision-making," Totia told Unquote. "We like investing in marketplaces, and this will continue in various verticals. We are also looking at various aspects of mobile as a new operating platform for the enterprise, focusing on industry 4.0 and Internet-of-Things (IoT) infrastructure."

The GP invests in "Engineering Europe", which comprises the CEE, DACH and Nordic regions.

"One of the important parts of our strategy is that we are headquartered in Vienna, Austria, focusing on central Europe, and we also have a US presence," Totia told Unquote. "We specialise in investing in local leaders that expand in Europe, and global challengers, which are companies that we have helped enter the US market over the past 15 years. We have invested in 50 companies, so we have a series of blueprints and a broad network to strategically help portfolio companies execute successful expansions."

The fund can consider investments in US companies with roots or significant operations in Europe.

3TS Fund IV expects to make 16-18 investments in total. "We have completed the first investment, to be announced shortly, in the IoT security sector, and we have a pipeline of 10-12 upcoming opportunities," Totia said. "We expect to close two to three of these by the end of the year."

The firm's current investments include Slovakia-based online glasses retailer Everim, as well as video game marketing service ComboStrike, which is based in Germany.

People
3TS Capital – Pekka Mäki (managing partner); Sever Totia (partner).

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